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Syrma SGS Technology IPO opens today: Should you subscribe?

Brokerages are confident about the prospects of the company given its inherent strengths and the likely growth of the Indian electronic manufacturing services market.

August 12, 2022 / 09:43 AM IST
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Syrma SGS Technology is a Chennai-based company engaged in electronic manufacturing services (EMS) with expertise in engineering and design of electronic products. It provides services and solutions to original equipment manufacturers – from the initial product concept stage to volume production.

Syrma’s product portfolio includes printed circuit board assemblies, radio frequency identification products, electromagnetic and electromechanical parts, memory products like USB drives and motherboards.

The company operates 11 manufacturing plants in Himachal Pradesh, Haryana, Uttar Pradesh, Tamil Nadu and Karnataka and has three research & development facilities in India and one in Germany.

Its marquee customers include TVS Motor Company, AO Smith India Water Products, Robert Bosch Engineering and Business Solution, Eureka Forbes, CyanConnode, Atomberg Technologies, Hindustan Unilever and Total Power Europe.

IPO features


The initial public offering comprises a fresh issue of shares for Rs 766 crore and an offer for sale of 3.37 million shares by the promoter. At the upper end of the price band, shares worth Rs 840 crore are expected to be sold in the offer.

Syrma already raised Rs 110 crore through a pre-IPO placement of 3.8 million shares at Rs 290 each, a 32 percent premium to the issue price of Rs 220.

The IPO opens on August 12 and closes on August 18. The price band for the offer has been set at Rs 209 to Rs 220 per share. The company’s shares will debut on the stock exchanges on August 26.

Syrma will use the funds raised on developing its R&D facility, expanding or setting up manufacturing facilities, and for working capital requirements besides general corporate purposes. The offer for sale money will go to the selling promoter.

Investors must bid for a minimum of 68 shares and in multiples of 68 shares thereafter. The minimum investment by a retail investor at the upper end of the price band will be Rs 14,960 per lot and Rs 1,94,480 would be the maximum investment against 13 lots, as they are allowed to invest up to Rs 2 lakh.

Brokerage recommendations

Brokerages are confident about Syrma’s prospects given its inherent strengths and the likely growth of the Indian electronic manufacturing services market. They have given the issue a “subscribe” or “subscribe with caution” rating.

India’s electronic manufacturing services market is expected to grow at a CAGR of 30 percent and is set to reach $135 billion by FY26 from $36 billion in FY21 as countries and companies reduce their dependence on China.

“India’s EMS market is expanding owing to the China+1 strategy, import substitution, and government incentives like the PLI (production-linked incentive schemes),” said in a report. “With its superior product mix, strong R&D capabilities, and adding capacities, we believe Syrma is well placed to capitalise on domestic and global opportunities.”

At Rs 220, the stock is priced at 50.7 times its FY22 EPS of Rs 4.34 (based on fully diluted post issue equity, said, recommending subscribing to the issue for listing gains.

Choice Broking said Syrma faces major risks and concerns from unfavourable government policies and regulations; delays in expanding capacity; unfavourable forex movements; working capital-intensive operations and competition.

“At the higher price band, the IPO is valued at a 24.1 percent discount to the pre-IPO placement price of Rs 290, which may be considered favourable by retail investors, but the company has demanded an EV/sales multiple of 2.5x (to its FY22 proforma consolidated sales), which is at premium to the peer average,” Choice Broking said in a report. “Thus the issue seems to be fully priced but considering the high growth potential in the electronic manufacturing sector, we are recommending a ‘Subscribe with Caution’ rating for the issue.”

Geojit Financial Services pointed out that Syrma’s revenue generation is largely from four of its 11 manufacturing units. These four facilities contribute 75 percent of revenue, which may be a cause for concern in case something happens at one of the facilities. Also, the company’s margins have been under pressure for the past two years and need to be monitored.

“At the upper price band of Rs 220, the stock is available at a P/E of 50.7x (FY22), which is at a discount to its peers (Dixon Technologies and Amber Enterprises),” Geojit Retail Equity Research said in a report. “Considering its good peer financial performance, strong focus on R&D, capacity expansion plans, positive industry outlook with government support through PLI schemes and China-plus one strategy of multinational companies, we assign a ‘Subscribe’ rating for the issue on a medium- to long-term basis.”

Anchor investors

Syrma raised Rs 252.04 crore from 18 investors through its anchor book on August 11. The company allocated more than 11.4 million shares to the anchor investors at Rs 220 each.

Marquee investors which participated in the offer included Nomura, Eastspring Investments, Volrado Venture Partners Fund, Abakkus Emerging Opportunities Fund, Malabar Select Fund, Kuber India Fund, and Franklin India.

ICICI Prudential, IDFC Mutual Fund, Tata Mutual Fund, IIFL Special Opportunities Fund, BNP Paribas Arbitrage, Edelweiss and Aditya Birla Sun Life Insurance also invested.

Disclaimer: The views and investment tips of investment experts on are their own and not those of the website or its management. advises users to check with certified experts before making any investment decisions.
Gaurav Sharma
first published: Aug 12, 2022 09:43 am
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