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India's top contract maker of room ACs Amber Enterprises targets Rs 500 crore QIP in September

The promoters own 44 percent, Asian private equity fund ADV Partners nearly 21 percent and Goldman Sach entities 4.86 percent of the Gurugram-based company.

August 22, 2020 / 12:42 AM IST

Amber Enterprises India, a leading contract maker of room air-conditioners, has kickstarted preliminary discussions to launch a qualified institutional placement (QIP) and raise around Rs 500 crore, people with knowledge of the matter told Moneycontrol.

Amber Enterprises is a contract maker for eight of the top 10 brands such as Voltas, Panasonic and LG, among others. The promoters own 44 percent, Asian private equity fund ADV Partners nearly 21 percent and Goldman Sach entities 4.86 percent of the Gurugram-based company.

“These are early days in the process and Amber Enterprises is planning to launch the proposed QIP in September and raise growth capital. It has mandated investment banks Edelweiss and JM Financial as of now for the fund raise,” one of the persons cited above told Moneycontrol. “More advisors might be appointed later if required.”

A second person said the firm wants to be prepared to meet the rising demand. “It is a beneficiary of the government’s push towards localisation of manufacturing and the import substitution policy as part of which high customs duties have been levied on the import of finished products and components.”

The Amber Enterprise stock has risen by 33 percent in the past three months.

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Post the outbreak of COVID-19, the government put its weight behind the ‘Make in India’ initiative, in a bid to deter excessive dependence on one supplier nation i.e China, which accounts for around 14 percent of India’s imports. Amber’s product portfolio also includes room a/c components, non a/c components for washing machines, refrigerators and microwaves, printed circuit board assembly and mobile a/c’s for railways and buses.

“The AC market is expected to expand and is hugely underpenetrated and the company will have an edge due to its strong network and relationship with all the leading brands,” added a third person. India manufactures around 7 million room air-conditioners every year while China manufactures as many as 110 mn room air-conditioners annually, and these numbers indicate the extent of opportunity for domestic players with lesser competition from the neighbour.

All the three individuals spoke to Moneycontrol on condition of anonymity.

Moneycontrol is awaiting an email response from Amber Enterprises and JM Financial and has sent reminders. This article will be updated once we hear from them. Edelweiss declined to comment.

A research report by Ambit Capital dated August 19, 2020 highlights the positioning of Amber Enterprises. “Amber is a leader in ODM (original design manufacturer) solutions (22 percent domestic RAC share) with a wide range of indoor and outdoor units and window ACs. It has successfully created manufacturing dependence for leading AC brands that prefer asset-light business models. Additional focus on components (33 percent FY20 sales) presents a significant cross-selling opportunity, even for non-AC durables,” the report said.

“Through 15 facilities in close proximity to clients, Amber has significant economies of scale to provide cost-effective solutions,” it added.

The report said the firm has gone beyond backward integration on the mechanical side and invested in electronics and is now focusing on higher value-added products (e.g inverter PCB’s) that will give it an edge over competition and improve fixed asset turnover.

Amber Enterprises India’s current m-cap is around Rs 5,600 crore. Its FY 20 revenues stood at Rs 3,000 crores with an Ebidta of Rs 213.48 crore and profit after tax at Rs 117.9 crore.
Ashwin Mohan
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