IKIO Lighting IPO: All You Need To Know

IKIO Lighting Ltd. will launch its maiden public offering on Tuesday to raise Rs 606.50 crore.

The third-party supplier of LED lights to brands like Phillips will raise Rs 350 crore from fresh issue and make an offer for the sale of around 90 lakh shares.

The Delhi-based company is eyeing a market value of Rs 2,202.5 crore at the upper end of the price band of Rs 270–285 apiece.

The fresh issue size is 15.90% and promoters are together divesting 11.65% of their holdings. Post-offer, the promoter's shareholding will be 72.5%.

Issue Details

• Issue opens: June 6

• Issue closes: June 8

• Issue size: Rs 606.50 crore.

• Face value: Re 10 apiece.

• Lot size: 52 equity shares and multiples.

• Listing: BSE and NSE.

• Lead managers: Motilal Oswal Investment Advisors Ltd.

Use of Proceeds

The company plans to use the net proceeds from the fresh issue for the following purpose:

• Repayment/ prepayment of certain borrowings: Rs 50 crore

• Investment in wholly owned subsidiary IKIO Solutions Pvt.: Rs 212.31 crore

Business

The company is a manufacturer of light-emitting diode or LED lighting solutions. It is primarily an original design manufacturer and design, develop, manufacture and supply products to customers, who further distribute these products under their own brands.

The company has four manufacturing facilities, with one located in the SIDCUL Haridwar industrial park in Uttarakhand and three in Noida in the National Capital Region.

The company works with customers to develop, manufacture and supply products that are designed by them.

Its products are categorised

• LED lighting

• Refrigeration lights

• Acrylonitrile butadiene styrene or ABS piping

The company's LED lighting offerings focus on the premium segment and include lighting, fittings, fixtures, accessories and components.

The firm provides lighting solutions—lights, drivers and controls—to commercial refrigeration equipment suppliers under its refrigeration light segment. It manufactures an alternative to polyvinyl chloride or PVC piping called ABS piping that is primarily used by US customers for plumbing applications in the recreational vehicles that they fit out.

It also manufactures and assembles other products, including fan regulators that are designed by clients, light strips, moulding, and other components and spares.

The largest customer is Signify Innovations India Ltd., erstwhile Philips Electronics India Ltd.

In the nine months ended Dec. 31, 2022, it derived 78.81% of pro forma consolidated revenues from operations from repeat customers.

Financials

Peer Comparison

The company competes with other listed players like Dixon Technologies (India) Ltd. and Amber Enterprises (India) Ltd. in the domestic market place.

Risk Factors

The company derives a substantial portion of its revenue from a single customer, Signify Innovations India Ltd. and over 85% of its revenue is derived from top 20 customers on a restated basis and a pro forma consolidated basis for the nine months ended December 31, 2022, and fiscal 2022.

• The company is dependent on, and derives a substantial portion of revenue from, LED lighting products. Any reduction in orders from the LED lighting product line could have a material adverse effect on business, results of operations and financial condition.

• The company does not receive firm and long-term volume purchase commitments from customers. If the customers choose not to renew their supply contracts or continue to place orders, its business and results of operations will be adversely affected.

• Its business is dependent and will continue to depend on manufacturing facilities, and are subject to certain risks in the manufacturing process, such as the breakdown or failure of equipment, industrial accidents, injury to employees, severe weather conditions and natural disasters.

• It depends on a number of third-party suppliers for key components, materials and stock-in-trade as well as customer support services, including product repairs and returns. It does not have any long-term contracts with any of the suppliers. Any shortfall in the supply of components and raw materials or an increase in component or raw material costs or other input costs may adversely affect the pricing and supply of products.

• The company depends on imported components from vendors in China, Singapore, Hong Kong and Taiwan for raw materials. Any shortfall in the supply of imported components and raw materials or an increase in component or raw material costs, or other input costs, may adversely affect the pricing and supply of products.

• Any surplus production on account of inaccurate forecasting of customer requirements and failure to manage inventory could adversely affect business, results of operations and financial condition.