Leading EMS player Dixon Tech has been on a deal spree in the past one month, signing three major joint ventures, including the latest term sheet to explore growth opportunities in the lighting business, a company filing shared on July 17 said.
Dixon Technologies signed a binding term sheet for a 50:50 joint venture with Signify Innovations to form Lightanium Technologies, which will conduct the lighting and accessories business.
The transaction involves three parts - transfer of Dixon's lighting business into the JV, entire stake in subsidiary Dixon Technologies Solutions (DTSPL), and transfer of Signify's LED lighting manufacturing operations at Vadodara.
As per the transaction, Dixon Tech will acquire a 8.75 percent stake in a joint venture (JV) by subscribing to 2.5 crore shares of Rs 10 each. Instead of paying cash, it will transfer its entire 100 percent stake in DTSPL to the JV, subject to certain conditions.
As part of the deal, Dixon Tech also signed a business transfer agreement to sell its lighting business to the JV entity on a slump sale basis. Instead of cash, it will receive 11.53 crore equity shares of JV company (Rs 10 each), representing a 40.37% stake, subject to certain conditions.
The JV entity also executed an agreement with Signify, wherein Signify will subscribe 49.12 percent stake of the share capital for a cash consideration of Rs 140.30 crore which will be used to acquire Signify’s LED lighting manufacturing business on a slump sale basis.
Shares of Dixon Tech are higher by over 13 percent in the last one month, coinciding with two other major JVs.
Dixon entered into a term sheet to acquire 51% stake in Q Tech India for access to high-precision manufacturing and specialized talent in camera and fingerprint modules for mobile handsets and IoT devices.
It also signed a joint venture with China's Chongqing Yuhai Precision Manufacturing for the supply of precision components used in electronics, laptops and mobile phones, where Dixon is expected to be a majority stakeholder in the joint venture.
Following the recent deals, Nomura has maintained a Buy rating on Dixon Tech with a target of Rs 21,409 per share, implying an upside potential of 35 percent, stating that the foray into camera module business is a key value addition. CLSA has reiterated its High Conviction Outperform call on Dixon with a target price of Rs 19,000 per share, taking note of steps to increase value addition in smartphones.
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