Subscribe with Caution to Kaynes Technology: Choice Equity Broking

Choice Equity Broking IPO report on Kaynes Technology

Kaynes Technology India Ltd. (Kaynes), an electronics system design & manufacturing (ESDM) services company is coming up with an IPO to raise around Rs. 860cr, which opens on 10th Nov. and closes on 14th Nov. 2022. The price band is Rs. 559 - 587 per share. The IPO is a combination of fresh and OFS issue. Kaynes will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, around Rs. 149cr will be invested in a subsidiary for setting up a new facility, Rs. 130cr will be utilized for the repayment/prepayment of certain borrowings, Rs. 115cr will be used to fund the working capital requirement and Rs. 99cr will be utilized for funding the capacity expansion at the existing manufacturing facilities. On 12th and 14th Oct. 2022, Kaynes has undertaken a pre-IPO placement of 0.234cr equity shares at a price of Rs. 555.9 per equity share, aggregating to Rs. 130cr.

Valuation and Outlook

At higher price band, Kaynes is demanding an EV/Sales multiple of 4.1x, which is premium to the peer average. Thus the demanded valuation seems to be stretched. However considering the policy tailwinds for the EMS/ESDM sector, Kaynes’s diversified business & customer profile and robust expansion in the order book, we assign a “Subscribe with Caution” rating for the issue.