Electronic design and manufacturing services provider Syrma SGS Technology has filed draft prospectus with SEBI. Syrma SGS Technology IPO comprises a fresh issue of shares worth INR926 crore as well as an offer for sale (OFS) of up to 3,369,360 equity shares by promoter Veena Kumari Tandon.
Net proceeds from Syrma SGS Technology IPO are proposed to be utilised for:
- Funding capital expenditure requirements for development of a R&D facility and expansion of manufacturing operations – INR571.2 crore
- Funding long-term working capital requirements – INR131.6 crore
- General corporate purposes
The upcoming IPO is likely to raise funds to the tune of INR1,200 crore. The company is also considering a pre-IPO placement of INR180 crore. If the pre-IPO placement is undertaken, Syrma SGS Technology IPO size will be reduced accordingly.
Syrma SGS Technology IPO
The company claims to be one of the fastest-growing players in its segment and offers services to global & domestic Original Design and equipment manufacturers (ODMs and OEMs). Incorporated in 2004, the company caters to a wide range of industries including industrial appliances, automotive, healthcare, consumer products and IT industries.
Over the years, the company 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. Its manufacturing infrastructure also enables it to undertake a high mix of products with flexible production volume requirements. According to a report by Frost & Sullivan, it is a leader in high mix low volume product management, apart from being a leading player in PCBA and custom RFID tag manufacturing.
Its marquee customers include TVS Motor, A. O. Smith India Water Products, Robert Bosch Engineering and Business Solution, Eureka Forbes, CyanConnode, Atomberg Technologies, and Total Power Europe B.V. The companies aggregated wallet share from its top 10 and top 20 customers increased by CAGR of 31.88% and 34.38% respectively from FY19 to FY21.
It currently operates through eleven manufacturing facilities in north India (Himachal Pradesh, Haryana and Uttar Pradesh) and south India (Tamil Nadu and Karnataka) and three dedicated R&D facilities, two of which are located in India at Chennai, Tamil Nadu and Gurgaon, Haryana respectively, and one is located in Stuttgart, Germany.
Syrma + SGS Tekniks = Syrma SGS
Syrma SGS Technology is a new entity formed in September 2021, following the acquisition of Gurugram-based SGS Tekniks by Syrma Technology in a cash and stock deal. The combination added manufacturing and R&D capabilities and supplier network, giving headroom for growth to the merged entity. It is also noteworthy that there was little to no overlap of customers and geographies. Subsequently, the company acquired Perfect ID in October 2021, bolstering the infrastructure and technical know-how for the production of RFID label tags and passive inlay tags.
Syrma SGS Technology IPO: Increasing top line, uneven margins
Syrma has put in impressive performance as far as top line is concerned. From INR357.4 crore in FY2019, it increased sales to INR444.5 crore in FY2021 while latest quarter revenues stood at INR135.3 crore. Net income, on the other hand, went from INR21 crore in FY2019 to INR43.9 crore in the next year before coming down to INR28.6 crore in FY2021.
Syrma SGS Technology’s Financial Performance
| Â | FY2019 | FY2020 | FY2021 | Q1 FY2022 |
| Revenue | 357.4 | 404.9 | 444.5 | 135.3 |
| Expenses | 330.1 | 347.1 | 408.1 | 126.7 |
| Net income | 21.0 | 43.9 | 28.6 | 5.6 |
| Margin (%) | 5.9 | 10.8 | 6.4 | 4.1 |
Figures in INR crore unless specified otherwise
Companies from the EMS sector have given some robust gains in the past. Two players from this space, Dixon Technologies and Amber Enterprises have rewarded investors very well while another one – Elin Electronics – has recently filed draft prospectus with SEBI. As such, Syrma SGS Technology IPO will be keenly watched by market participants.
