Kaynes Technology IPO: Company Files DRHP; Check Objective, Financials, Risk Factors

Kaynes Technology, a leading Electronics Manufacturing Services (EMS) player in professional electronics, has filed the draft red herring prospectus (DRHP) with markets regulator Securities & Exchange Board of India (SEBI) for its initial public offering (IPO).

Kaynes Technology IPO comprises a fresh issue of Rs 650 crore and an offer of sale (OFS) of up to 72 lakh shares by promoters and existing shareholders. In the OFS, promoter Ramesh Kunhikannan will sell up to 37 lakh equity shares, while investor Freny Firoze Irani will offload 35 lakh equity shares.

The equity shares offered in the Kaynes Technology IPO will have a face value of Rs 10 each.

The details about the total number of shares, IPO price, IPO dates, bid lot size, among others, will be announced in due course.

DAM Capital Advisors and IIFL Securities are the book-running lead managers for the Kaynes Technology IPO.

The company may also consider a further issue of equity shares, including a rights issue, private placement, preferential offer, or any other method aggregating up to Rs 130 crore. If such placement is completed, the fresh issue size will be reduced.

Objective of Kaynes Technology IPO

According to the DRHP filed by Kaynes Technology, it will utilise the net proceeds of the fresh issue for repayment in full or part of certain borrowings availed by the company. From the fresh issue, Rs 130 crore will be utilised here.

Further, Rs 98.93 crore will be used for funding capital expenditure towards the expansion of the existing manufacturing facility at Mysore, Karnataka, and near the existing manufacturing facility at Manesar, Haryana.

Also, the company proposes to keep Rs 149.3 crore for investment in a wholly-owned subsidiary, Kaynes Electronics Manufacturing Private Limited, for setting up a new facility at Chamarajanagar, Karnataka. About Rs 114.74 crore will be used for funding the working capital requirements of the company and for general corporate purposes.

About Kaynes Technology 

Kaynes Technology is a leading end-to-end and IoT (Internet of Things) solutions-enabled integrated electronics manufacturing player. With over three decades of experience, the company has built capabilities across the entire spectrum of electronics system design and manufacturing (ESDM) services.

The company has eight manufacturing plants with a total capacity of approximately 600 million components (as of December 2021). Its plants are in the states of Haryana, Himachal Pradesh, Karnataka, Tamil Nadu and Uttarakhand. The company serves 313 customers in 20 countries globally.

Kaynes Technology Financials

As per the draft IPO papers, Kaynes Technology’s revenue from operations grew at a compounded annual growth rate (CAGR) of 7.46% to Rs 420.63 crore in FY21 from Rs 364.23 crore in FY19. Net profit during FY21 rose to Rs 9.73 crore from Rs 9.36 crore in the previous year. Its revenue during the nine months ended December 31, 2021, was at Rs 467.78 crore.

EBITDA grew 8.01% to Rs 40.89 crore as of March 31, 2021, from Rs 35.05 crore as of March 31, 2019. It was Rs 53.65 crore during the nine months ended December 31, 2021.

Management

Ramesh Kunhikannan is the Promoter and Managing Director of Kaynes Technology. Savitha Ramesh is the Promoter, Chairperson and Whole-time Director.

Jairam Paravastu Sampath is the Whole-time Director and Chief Financial Officer of the company.

Anup Kumar Bhat, Vivekanandah Ramasamy, Koshy Alexander, Murali SG and Poornima Ranganath are Independent Directors on the Board of Kaynes Technology

Internal and External Risk factors

-The company’s business is dependent on the sale of products to its customers, and the loss of one or more such customers or a reduction in demand for their products could adversely affect its business, results of operations, financial condition and cash flows.

-If its customers do not outsource manufacturing of the products, or if there is a downward trend in the original equipment manufacturers (OEMs) / original design manufacturing (ODMs) business and/or demand for the company’s IoT solutions, it could have an adverse effect on its business and financial condition.

-Any imminent economic slowdown due to the threat of more waves of COVID-19 pandemic.

-Any disruption in the distribution network, including disruptions in supply and transport of inputs and finished products.

– Challenging global economic conditions.