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

The proceeds of the IPO will be primarily utilised for capital growth initiatives

Exicom Tele-Systems is looking to raise revenue contribution from EV charging business from the current around 30 percent. At present, the critical power business forms 70 percent of its revenue.

According to the company management, the growth trajectories of its different business segments aren’t comparable due to their distinct market dynamics. The EV charging business contributed nearly 8.6 percent to revenues in FY21, with the share increasing to 31.7 percent in FY23.

The company expects further expansion, aligning with the projected 50-60 percent CAGR in the EV charging market over the next four years.
The proceeds of the IPO will be primarily utilised for capital growth initiatives. A significant portion of the funds, approximately Rs 150 crore, will be allocated for constructing an integrated manufacturing complex in Hyderabad. Additionally, Rs 40 crore will be invested in new product development and enhancing research and development capabilities.

Working capital requirements will be addressed with Rs 120 crore, and the remaining funds will support general corporate purposes, including sales growth and marketing activities.

The IPO proceeds will also be utilised to retire working capital debt. Despite this, some working capital debt will still remain on the company's balance sheet, said the company’s top official in an IPO-exclusive interview. Exicom operates in two primary segments: critical power and EV charging. The critical power segment focuses on manufacturing specialised power electronics and lithium-ion battery systems for telecom infrastructure, catering to large telcos and tower companies. In the EV charging business, the company develops and manufactures EV chargers for various applications, collaborating with auto OEMs, charge point operators, and bus OEMs.

Anant Nahata, MD and CEO of Exicom Tele-Systems, discussed various aspects of the company's initial public offering (IPO) and future plans in an interview. Edited excerpts:

Your IPO is a mix of a fresh issue as well as an offer for sale. How do you intend to utilise the proceeds?

We are raising Rs 429 crore and the majority of the deployment is towards primary use of capital to grow the company. About Rs 150 crore is going into building a new integrated manufacturing complex for all the products that we manufacture in our various businesses. This is in Hyderabad, Telangana. And about Rs 40 crore is being invested into new product development and increasing our R&D resources and infrastructure. About Rs 120 crore is going into working capital by reducing some part of the current working capital from the banks and investing in new working capital as well. And the rest for general corporate purposes, primarily to drive sales growth, increase distribution channels and sales and marketing activities.

Who are your key clients and how have they been performing of late?

So, we are engaged in two businesses. One is what we call critical power. Here, we manufacture some specialised power electronics and lithium-ion battery systems which go into the telecom infrastructure. The job of these products is to make sure they provide uninterrupted power to the telecom network and keep it live 24/7. Here, our primary customers are large telcos and tower companies, which roll out this telecom infrastructure. The other business is the EV charging business, where we developed technology and manufacture EV chargers for various applications, be it a home charger. If you as a consumer buy an electric car, that's what you would use to charge your car at home or whether it is a fast-charging station as part of the city infrastructure or highways or whether it's a heavy-duty charger to be used at bus depots. Here, we work with different vertical markets, be it auto OEMs, be it charge point operators – these are people who invest in the charging network on highways, in cities or it may be large bus OEMs which are rolling out electric buses under various government schemes and models out there.

How is the demand shaping up for you?

We were one of the early entrants in the EV charging space, and I think India has come a long way in developing the EV ecosystem from 2019 till here. Thanks to the industry growth and our relentless effort and hard work, we have about 60 percent market share in the residential charging market and 25 percent in the commercial charging market, as per a CRISIL report. And if you see the industry report, the forecast is of almost 50-60 percent CAGR because the underlying EV cars penetration is growing at that rate. All of them require charging. So whether it's fleet charging, bus charging, or home charging – all these markets are expected to grow at 50-60 percent. And that means in terms of demand, in terms of absolute numbers, this market is going to grow from about Rs 1,200 crore in 2024 to almost Rs 9,000+ crore in 2028. As more OEMs and vehicle models come on board, more charges get put on the ground, there will be a positive effect within the ecosystem to enable people to buy more cars, and that's how the demand will shape up for the industry.

EV charging still forms just about 30 percent of your revenues. How do you plan to bring it at par with your other critical power business?

From that perspective, it's not a direct comparison that we make within our company. The telecom business is a fairly mature business, which grows at about 10 percent CAGR. EV charging, on the other hand, is a fairly new business in the industry that has been growing at a very fast rate and is expected to grow at 50-60 percent CAGR over the next four years. And if you see our last three financial years, our EV recharger contribution to overall revenue has grown from 8 percent to 10 percent to 30 percent in FY23, and 30 percent even in H1 FY24. But at a base level, we are a power electronics business. That's the common theme between those two businesses. We have integrated manufacturing facilities where we produce both these equipment lines, and we are preparing ourselves for growth in both these businesses, wherever the growth may come from.

You will be using some of the IPO proceeds to retire debt. Do you think you'll be able to retire debt fully?

This is not long-term debt, this is working capital debt. But in order to have a healthier balance sheet, the board took a call to retire some of the working capital debt and also invest some of the fresh raise into new working capital. So we will continue to carry some working capital debt even after the utilisation of the proceeds.

How do you plan to expand going forward?

If you see our strategy, it's very growth oriented. We are investing in a new manufacturing complex to take care of the rise in demand which we expect to see in the EV ecosystem, thereby creating demand for EV chargers. We have plans to expand geographically, particularly in Southeast Asia, Africa and Europe for our businesses, and invest in R&D.

R&D has always been the backbone of the company. We have developed and commercialised a great number of products over the last couple of decades and will continue to invest in making products for new use cases.