Amber Enterprises India Ltd.'s stock is up 27% since Dec. 20 on the back of media reports speculating a potential demerger of its electronics business.
Currently, the company operates in three key segments — consumer electronics which includes their air conditioners business; electronics business; and the railway subsystem and mobility business which traditionally included ACs for railways but the scope has been expanded to manufacturing doors, gangways, driving gears as well.
The electronics segment includes manufacturing products such as routers, inverter control boxes, and printed circuit boards assembly, among others.
While Amber Enterprises' stock has been an outperformer over the past year as well—rising by 106%—the fresh spurt seen in the shares warrants attention towards the potential demerger of the electronics business. Here's a look at why it could be a gamechanger for the company.
Currently, the company operates in three key segments — consumer electronics which includes their air conditioners business; electronics business; and the railway subsystem and mobility business which traditionally included ACs for railways but the scope has been expanded to manufacturing doors, gangways, driving gears as well.
The electronics segment includes manufacturing products such as routers, inverter control boxes, and printed circuit boards assembly, among others.
While Amber Enterprises' stock has been an outperformer over the past year as well—rising by 106%—the fresh spurt seen in the shares warrants attention towards the potential demerger of the electronics business. Here's a look at why it could be a gamechanger for the company.
Electronics Business: Entry Via Acquisitions
Amber Enterprises was engaged in the business of manufacturing air conditioners, with increase in focus for components. With its first factory established back in 1994, their steady focus on this business reaped solid returns for its investors who participated in its IPO back in 2018. The IPO had an issue price of Rs 855 to 859 per share. The stock is up almost nine times since then.
In December 2017, Amber increased its focus in the electronics business when it acquired a 70% stake in the Greater Noida-based IL JIN Electronics. This was followed by another acquisition in March 2018, when Amber Enterprises acquired a 19% stake in Ever Electronics, and later increased its stake to 70%.
Both Ever and IL JIN are engaged in manufacturing, assembling, dealing, importing, and exporting electronic assembled printed circuit boards for RACs and other consumer durables.
IL JIN was the Indian entity of the South Korea-based IL JIN Group. IL JIN manufactures and deals in electronically assembled printed circuit boards or PCBs for consumer electronics. Its clientele includes the likes of Panasonic, LG and Samsung, among others.
Similar to IL JIN, Ever is one of India’s leading electronic printed circuit board manufacturers. Some of the major clients of Ever include LG, LS Automotive, Powercraft Electronics, Godrej and Intangibles Labs.
Electronics Business Demerger
There have been media reports speculating demerger of electronics business of Amber. Since the news, the stock has climbed 27%. The electronics segment includes manufacturing products such as routers, inverter control boxes, and PCBA, among others. All these products are used in ACs, refrigerators, smart meters, appliances, automobile, energy, defence and aerospace etc.
Amber already has five factories for electronics segment and recently inaugurated its sixth factory in Hosur, Chennai. This factory will be used for PCB manufacturing.
The share of electronics business in the company's overall business has steadily increased. Currently, the share of electronics business stands at 22% of total revenue, up from 16% a couple of years ago.
The company's electronics business has now surpassed the margins of the traditional consumer business as well.
Ascent Circuits: Latest Acquisition Provides Entry Into Defence
Amber Enterprises acquired a 60% stake in Ascent Circuits Pvt. in January 2024. Ascent is a South India-based homegrown leading player engaged in the manufacturing of PCBs. They serve industries such as aerospace and defence, medical, energy solutions, automotive, telecom, data centres, consumer electronics, and IT.
Ascent has a strong defence clientele like Indian Space Research Organisation, Bharat Heavy Electricals Ltd. and Bharat Electronics Ltd. Ascent reported revenues of roughly Rs 278 crore in fiscal 2023.
This acquisition enabled Amber’s entry into single-sided PCB, double-sided PCB, multi-layered PCB etc. According to BNP Paribas, this business has current Ebitda margin of c18-20%.
Joint Venture With Korea Circuits
Amber Group inked a memorandum of understanding with South Korea’s Korea Circuit, a YoungPoong Group company. This was done through Ascent, and the scope of the MoU includes manufacturing flex, HDI, and semiconductor substrates PCBs, and fortifying PCB manufacturing in India.
Korea Circuits has been a pioneer of the Korean PCB industry, being involved in the production of PCB for the past 45 years.
The acquisition will enhance capability for providing solutions to mobile and semiconductor industry as well as envelop the entire portfolio of PCBs required for various applications in India’s electronics manufacturing growth story.
Bullish On India's Electronics Market
The electronics business of the company has been a steady compounder. As per Amber’s management, currently 20% of India’s inverter PCBA requirement in air conditioners is supplied by the company
Post Amber’s latest analyst meet in October 2024, the management reiterated the scope of the electronics industry. The electronics market in India is expected to reach $300 billion by fiscal 2030 from the current level of $115 billion. PCBs form nearly 3-4% of the cost of electronics and the PCB market in India currently stands at $4 billion or roughly Rs 3,200 crore.
The company expects to grow electronics segment to Rs 1,800 crore to Rs 2,000 crore in fiscal 2025 and at a 35% compound annual growth rate over the next few years, according to Motilal Oswal.
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