Syrma
SGS Technology, promoted by Sandeep Tandon, Jasbir Singh Gujral, Veena Kumari
Tandon and Tancom Electronics, is a technology-focused engineering and design
company engaged in turnkey electronics manufacturing services, specializing in
precision manufacturing for diverse end-use industries.
It
is among the large bouquet of EMS players in India and is one of the fastest
growing Indian-headquartered ESDM companies. It has a track record of technical
innovation which involves working with the engineering teams of marquee
customers, and over the years, has evolved to provide integrated services and solutions
to OEMs, from the initial product concept stage to volume production through
concept co-creation and product realization.
In addition to its existing manufacturing, and
engineering and design services offerings, the company also provides prototyping
services, tester development service and repair & rework services.
The
company is leader in high mix low volume product management and is present in
most industrial verticals. Further, it is one of the leading printed circuit-board
assembly (PCBA) manufacturers in India, supplying to various OEMs and
assemblers in the market. It is also
amongst the top key global manufacturers of custom RFID tags. Its manufacturing infrastructure enables it
to undertake a high mix of products with flexible production volume
requirements.
The
product portfolio of the company is wide with applications across diverse end
use industries. Its products are primarily focused toward ODMs and OEMs serving
end-use industries including the automotive, healthcare, IT, industrial
appliances, energy management, water purification, power supply and consumer
products industries.
Client
profile of the company include marquee customers such as TVS Motor Company Limited, A. O. Smith India
Water Products Pvt. Ltd., Robert Bosch Engineering and Business Solution Pvt
Ltd, Eureka Forbes Limited, CyanConnode Limited, Atomberg Technologies Private
Limited, Hindustan Unilever Limited, and Total Power Europe BV. Further apart
from India its products are sold in over 24 countries, including the USA,
Germany, Austria, and UK.
The
company has 11 manufacturing facilities spread across five states namely Tamil
Nadu, Karnataka, Himachal Pradesh, Haryana, and Uttar Pradesh. Aggregate annual installed capacity of the
company as end of March 31, 2022, was 10120 million components per annum and
3.6 million assemblies of PCBA, 300 million tags of RFID, and 1500000 tags per
month of RFID label tags, 6 million coils of magnetics, 7.2 million modules of
IT products and 180 million components per annum of Zone of autonomous
creations. Capacity utilization on product wise ranges between 75-87%.
The company is focused on
technological innovation through our R&D capabilities. It has three
dedicated R&D facilities, two of which are in India at Chennai, Tamil Nadu,
and Gurgaon, Haryana, respectively, and one is in Stuttgart, Germany.
Issue
The
offer comprises both Offer for Sale (OFS) by promoters and Fresh Issue
aggregating Rs 766 crore. OFS involves
selling of 3369360 equity shares by Veena Kumari Tandon, a promoter. Post OFS
the shareholding of Veena Kumari Tandon will be 0.86% of the expanded equity.
Object
of the issue
Of
the total proceeds from the fresh issue about Rs 480.006 crore will be used for
funding capital expenditure requirements for development of a R&D facility
and expansion / setting up of manufacturing facilities and Rs 131.58 crore will
be used to fund working capital requirements.
Strength
The
customer base of the company is wide across various industries. It has strong
long-standing relationship with most of them. During FY2022, the company
catered to over 200 customers of which 16 customers have been associated with
the company for over a period of 10 years.
Further about 64.58% of its FY2022 revenue come from customers who have
been associated with it for over three years.
The number of OEMs and ODMs the company catered to have grown to 409
during FY 2022 from 288 during FY 2020. The revenue stream is also diversified in
terms of end use industry. In FY2022
about 19.9% of the revenue came from automotive, 20.4% from consumer, 12.8%
from healthcare, 34.8% from industrial, 10.2% from IT and 2% from railways
& others. And this reduces the
dependence on any one end use industry.
Long standing relationship with its customers also provides significant
potential to increase the wallet share from existing customers through cross
selling and up selling. Aggregatewallet-share of its top 10 and top 20
customers increased by CAGR of 26.20% and 25.79%, respectively, fromFY 2020 to
FY2022. Exports accounted 83.63%,
70.04%, and 54.77% of its revenue from operation in FY2020, FY2021 and FY2022,
respectively.
Manufacturing
operations of the company is vertically integrated and strategically located to
client/market. It manufactures various
electromagnetic components parts such as transformers and chokes, which are
required for the manufacture of its PCBA products. This helps it to increase its efficiency in
terms of cost as well as time. Similarly
in case of RFID, the company apart from manufacture of RFID sensors, also
manufactures customized tags and other products where these RFID sensors may be
incorporated. Manufacturing facilities
of the company are strategically located to efficiently cater to customers in
both North and South India as well as cater to export markets with most of the
facilities located in proximity to Chennai Port or airports of Chennai, Bangalore
and Delhi.
Have
been provisionally selected for incentives under the Production Linked
Incentive Scheme(PLI) for Telecom and Networking Products, notified by the
Ministry of Communications, Department ofTelecommunications, on June 3, 2021.
These product linked incentives make the company eligible to manufacture
productsin categories like access and customer premise equipment (CPE), IOT
access devices and other wireless andenterprise equipment.In addition, the company
hasbeen provisionally selected as beneficiaries for the incentives beinggranted
under the PLI for White Goods (Air Conditioners & Led Lights), notified by
the Ministry of Commerce& Industry, on June 4, 2021, and notified by the
Ministry of Electronics and Information Technology on April 1, 2020.This will
make the company eligible to make control assemblies for indoor units or
outdoor units or remotes for air-conditioners and Leds.
Penetration and ownership of
automobiles and consumer durables the two key end use industries are low in the
country offering strong demand growth for its products. Electronics production
in India is expected to grow at a CAGR of 32.3% to reach ? 20,133 Billion (US$
272 billion) by FY2026. GOI extending strong support India has the potential to
be one of the most attractive manufacturing destinations and support the
objective of ‘Make in India for the World’.
Weakness
Availability
of key materials (electronic components, wound components, wiring harness,
plastic parts, sheet metal parts and process consumables) and at reasonable
price are crucial for profitable operations of the company. Thus, shortage of any
of key materials may escalate the price as well as disturb the production of
the company impacting its profitability.
For instance, lockdowns and social-distancing measures in the region,
primarily in Taiwan, have prolonged a global shortage of semiconductors.
The
company relies or supply customers on short-term purchase orders and do not
have long term supply agreements providing firm commitment from customers. This makes the business working capital
incentive as it needs to maintain high inventory.
Contingent
liability (claims against the company not acknowledged as debt) as end of March
31, 2022, stood at Rs 7.695 crore.
In
the last three fiscals, the operating and net profit margin is on steady
decline.
Valuation
Sales
for the fiscal ended March 2022 was up by 47% to Rs 646.26 crore. The OPM contracted by 200 bps to 8.7% and,
thus, the growth at operating profit moderated to stand at 21% to Rs 56.52
crore. Eventually, PAT was up by 7% to Rs 30.61 crore hit largely by higher tax
incidence.
The EPS for FY2022 based on post issue
expanded equity on higher price band is Rs 1.7 and PE works out to 126.7
times.
In
comparison the Dixon Technologies and Amber Enterprises are quoting at a PE of
121.1 and 70 times of their consolidated FY2022 EPS.
Syrma SGS
Technology: Issue Highlights
|
Fresh Issue (in
Rs. Crore)
|
766
|
Offer for sale
(in no. of shares)
|
3369360
|
Price band
(Rs.)
|
|
Upper
|
220
|
Lower
|
209
|
Post-issue
equity (Rs crore)
|
|
in Upper price band
|
176.23
|
in Lower Price Band
|
178.06
|
Post-issue
promoter (including promoter group) stake (%)
|
47.42
|
Minimum Bid (in
nos.)
|
68
|
Issue Open Date
|
12-08-2022
|
Issue Close Date
|
18-08-2022
|
Listing
|
BSE, NSE
|
Rating
|
45 /100
|
Syrma SGS
Technology : Financial Results
|
|
|
2003 (12)
|
2103 (12)
|
2203 (12)
|
|
Sales
|
397.08
|
438.30
|
646.26
|
|
OPM (%)
|
17.0
|
10.7
|
8.7
|
|
OP
|
67.69
|
46.76
|
56.52
|
|
Other income
|
7.81
|
6.18
|
8.25
|
|
PBIDT
|
75.50
|
52.93
|
64.77
|
|
Interest
|
7.97
|
4.52
|
3.78
|
|
PBDT
|
67.53
|
48.41
|
60.99
|
|
Depreciation
|
9.70
|
12.07
|
13.09
|
|
PBT
|
57.83
|
36.34
|
47.90
|
|
EO Exp
|
5.60
|
0.00
|
0.00
|
|
PBT after EO
|
52.23
|
36.34
|
47.90
|
|
Tax
|
8.35
|
7.72
|
17.29
|
|
PAT
|
43.88
|
28.62
|
30.61
|
|
PPT
|
0.00
|
0.00
|
0.00
|
|
Net profit
|
43.88
|
28.62
|
30.61
|
|
EPS (Rs)**
|
2.8
|
1.6
|
1.7
|
|
** on post
issue equity of Rs 176.229 crore. Face Value: Rs 10
|
EPS is
calculated after excluding EO and relevant tax
|
# EPS can not
be annualised due to seasonality in operations
|
Figures in Rs
crore
|
|
|
Source:
Capitaline Corporate database
|
|