Expect to be debt free post IPO, have industry-leading EBITDA margins: Elin Electronics' Akash Sethia

Elin Electronics' top five customers account for about 65.43 percent of revenue from operations.

Leading electronics manufacturing services provider Elin Electronics' is now one of the last initial public offerings (IPO) of 2022. Through its maiden public issue, it aims to raise Rs 475 crore and expects to clear off its cost liabilities, becoming debt-free post the IPO.

Being one of the largest fractional horsepower motor manufacturers in India, Elin Electronics manufactures end-to-end product solutions for major brands of lighting, fans, and small kitchen appliances.

Also Read: Elin Electronics: This electronics manufacturing IPO has a valuation hook

Debt repayment, asset turns

''The total debt on the books of the company is approximately Rs 100 crore. Post the IPO, we expect to be completely debt-free. Out of Rs 175 crore, we intend to use Rs 40 crore towards capital expenditure (capex),'' said Akash Sethia, Head-Strategy, Elin Electronics in an exclusive interview with CNBC-TV18.

The company has covered a fairly large capex of Rs 125 crore in the last three-to-three-and-a-half years, so going forward it doesn't expect a material capex to come in, according to Sethia.

''Today our asset turns are close to 4x on a gross basis, which in some sense puts the business at an inflection point where capex has been done, so revenues will come in the year ahead,'' he said, adding, ''on a steady basis, we expect our asset turns to be approximately five times.''

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Market segments, EBITDA margins

Elin Electronics operates across three key business segments. In the LED lighting segment, it has a 7-7.5 percent market share. In the appliances business, its market share is approximately 11 percent, and in the fractional horsepower motor segment, the company is a market leader with a market share of approximately 12 percent, according to Sethia.

''In terms of our EBITDA margins, we have historically been in the 7-8 percent band which are industry-leading margins. The biggest reason for this is the backward integrated nature of our operations,'' Sethia told CNBC-TV18.

The company produces most of the sub-assemblies and the components required to manufacture the end-product in-house, which enables it to be amongst the most competitive players in terms of cost and to have a higher degree of control over the supply chain, product quality and timelines, according to the top executive.

About two years back, the company's top five customers contributed to around 75 percent of its revenues from operations. ''Today, that figure is down to 60-65 percent. Our focus is to bring it down close to 50 percent in the next few years,'' he said.

Also Read: Elin Electronics IPO: Is low valuation reason enough to invest?

Elin Electronics IPO was subscribed 19 percent on December 20 - the first day of bidding. The issue garnered bids for 26.92 lakh shares against 1.42 crore shares on the offer. The IPO comprises a fresh issue of Rs 175 crore and an offer for sale of Rs 300 crore by promoters.

The price band of the issue was fixed at Rs 234–247 per share. The implied market capitalisation at the upper price band of the issue is Rs 1,226 crore. The Rs 475-crore IPO opened for subscription today and will close on December 22.

Ahead of its IPO, the company has raised Rs 142 crore through anchor investors. A total of 15 investors including SBI Mutual Fund, Kotak Mahindra Trustee, SBI Life Insurance, Aditya Birla Sun Life Trustee, and PGIM India invested in the IPO.