IKIO Lighting shines D-Street on debut: Should you invest now?

IKIO Lightning mainly caters to the premium lighting segments with Signify (Philips) being one of its largest clients.

Those who got allotment during the book building process of IKIO Lighting are currently sitting on hefty gains, but analysts warn those that want to enter now, saying all positives may have already been captured in the price now. IKIO Lighting, after listing at a premium of 37 percent, the stock price further went up by another 4-5 percent across exchanges. At 12.20 pm, it traded at Rs 407.60, up 43 percent over issue price of Rs 285 on BSE.

“Those who did not get allotment should avoid entering now as all positives have been factored in,” said Astha Jain, Research Analyst, Hem Securities. “There are several positives working for the company; it being an original design manufacturer instead of an original equipment manufacturer, comparatively higher EBITDA margins and acquisition of two subsidiaries that will lift earnings.”

She advised that if an investor wants to invest, he or she should wait for the prices to take a dip.

The listing gains for the LED maker was in line with expectations while further gains are working as a cherry on cake for investors. Though, some selling pressure at top has been observed that may cap the upsides in coming days.

“Considering its strong focus on R&D and backward integration, its well-established relationship with clients, and its consistent financial performance we still have a positive view on this thus we will suggest investors hold this share for a longer period by keeping a stop loss 10 percent below its listing price,” said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart.

The company and its shareholders raised Rs 606.5 crore via the maiden public issue which consists of a fresh issue of Rs 350 crore. IKIO is going to utilise fresh issue proceeds for repaying debts, and investment in wholly owned subsidiary IKIO Solutions to set up a new facility in Uttar Pradesh.

IKIO Lighting is a fully integrated original design manufacturer (ODM) in the LED lighting industry. ODMs are those that take the original specifications of another company or individual and build the design to the product specifications.

Among key strength for the Noida-based company is its robust product portfolio that includes all kinds of lightning solutions to fan regulators to acrylonitrile butadiene styrene (ABS) piping, which is used as an alternative to Polyvinyl Chloride (PVC) pipes in plumbing solutions. The company also has a high customer retention rate with a diverse customer base across industry sectors and geographies. The company has four manufacturing facilities in India with an ongoing plant expansion in Noida.

IKIO Lightning mainly cateris to the premium lighting segments with Signify (Philips) being one of its largest clients. IKIO is also exploring export opportunities in the LED lighting/RV segments through new client additions.

What analysts have to say

Analysts point out that the company’s substantial portion of revenue comes from a single customer, Signify innovation India Limited, erstwhile Philips India – 70 percent revenue in 9MFY23, which is a concentration risk. Any slowdown in the business of Signify will spell an omen for IKIO.

However, in the near term, earnings are likely to be much higher as the new acquisitions will boost its revenue. The company will announce its March quarter numbers in the coming few days.

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