Exicom Tele-Systems IPO: Should you subscribe to Rs 429-crore public offer?

Exicom Tele-Systems is a power management solutions provider. It operates two business verticals. The EV chargers business provides smart charging systems for residential, business, and public charging in India. The company was among the first entrants in the EV chargers manufacturing segment.

Its critical power solutions (CPS) business offers customised DC power systems and Li-ion-based energy storage solutions for energy management.

The company operates three facilities in India — in Himachal Pradesh's Solan and two in Gurugram in Haryana. NextWave Communications and Anant Nahata are the promoters of the company.

Offer details

The offer comprises a fresh issue of 2.31 crore shares worth Rs 329 crore and an offer-for-sale (OFS) of 70.42 lakh shares worth Rs 100 crore at the upper price band.

Also Read: Exicom Tele-Systems IPO: 10 things to know before subscribing to the Rs 429-cr issue

As of March 31, 2023, the company had a market share of 60 percent and 25 percent in the residential and public charging segments in India.

NextWave Communications, Satellite Finance and Vinsan Brothers hold 76.55 percent, 4.64 percent and 4.35 percent stakes, respectively, in the company. HFCL has a 7.74 percent stake, while the rest is held by public shareholders, including Rare Enterprise.

Exicom Tele-Systems will spend Rs 145.77 crore to set up assembly lines at a facility in Telangana, Rs 69 crore will be set aside as working capital and Rs 40 crore will be invested in R&D and product development. A sum of Rs 50.3 crore will be used for repaying debts and the remaining money will be for general corporate purposes.

Anchor investors

Ahead of the IPO, the company raised Rs 178 crore from anchor investors. Marquee investors including Maybank Asiapac Ex-Japan Equity I Fund, Nepean Long Term Opportunities Fund, Abakkus Diversified Alpha Fund, Quant Mutual Fund, JM Financial Mutual Fund, Aditya Birla Sun Life Trustee, SBI General Insurance Company, participated in the round.

Financials

The company’s revenue dipped 16 percent to Rs 707.93 crore in FY23 from the previous year, while profit after tax grew 24 percent to Rs 6.37 crore. Return on capital employed (RoCE) came down to 10.92 percent in FY23 from 17.66 percent in FY22, while return on equity (RoE) stood at 13.38 percent. In FY23, overseas customers contributed 8.79 percent to the revenue. China accounted for 61 percent of its total raw material imports.

The revenue from the CPS business dipped to 68.33 percent in FY23 from 91.56 percent in FY22. While revenue from the EV charger business rose to 31.67 percent from 8.44 percent.

As of December 31, 2023, the aggregate amount of outstanding borrowings (fund-based) was Rs 95.34 crore and for outstanding borrowings (non-fund-based) was Rs 73.62 crore.

Also Read: IPO-bound Exicom Tele-Systems aims to increase revenue from EV charging solutions

For the period ended on September 30, 2023, Exicom Tele Systems reported a net profit of Rs 27.46 crore with a revenue of Rs 455 crore. EBITDA was Rs 41.46 crore and EBITDA margin was 9.11 percent while PAT margin was at 6.04 percent in the same period.

The price-to-earning (P/E) ratio at 42 times is much cheaper than rivals Servotech Power Systems (187.69x) and HBL Power Systems (146.22x).

Should you subscribe to Exicom Tele-systems IPO?

Canara Bank Securities: Subscribe for listing gains and long term

“The company’s P/E is valued at 42.014x for FY23. We recommend subscribing to the issue for listing gains and long-term.”

Reliance Securities: Subscribe

“ETSL's longstanding customer relationships with global customers in both segments of business, experienced management team, a new manufacturing facility to drive higher asset turnover, higher entry barriers and improved financials are the key advantages hence, we recommend ‘Subscribe’ the issue.”

Nirmal Bang: Subscribe

“Exicom has delivered growth and return ratios which are similar to listed peers while its valuation is at a significant discount. Based on strong industry tailwinds in the EV industry and its dominant market share, we are positive on Exicom’s listing prospects and thus we recommend subscribing to the IPO.”

SBI Securities: Subscribe

“The growth for the EV industry looks very attractive going ahead in India, as well the need for telecommunication infrastructure for 5G network will give an edge to the company’s growth in future. We recommend investors to ‘Subscribe’ to the issue for the long-term investment horizon.”

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