IPO Analysis: Exicom Tele-Systems Ltd

IPO Rating: Apply for the long-term

About the Issue:  

Exicom Tele-Systems Ltd is launching its initial public offering (IPO) for equity shares valued at Rs 10 each. The IPO price range is set between Rs 135 and Rs 142 per equity share, resulting in a total issue size of Rs 429 crore at the upper price band.  

The IPO is scheduled to commence on February 27, 2024, and will conclude on February 29, 2024. The market lot size for the IPO is 100 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 14 lots, equivalent to 1,400 shares or a total investment of Rs 1,98,800 assuming the upper price band.   

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Part-financing the cost towards setting up of production/assembly lines at the planned manufacturing facility in Telangana

2. Repayment/pre-payment, in part or full, of certain borrowings of the company

3. Part-funding incremental working capital requirements

4. Investment in R&D and product development

5. General corporate purposes

Promoter holding  

NextWave Communications Private Limited and Anant Nahata are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 93.28 per cent in the company.   

Company profile  

Established in 1994, the company operates within two distinct business verticals. Firstly, it is engaged in the critical power solutions business, offering design, manufacturing, and servicing of DC Power Systems and Li-ion based energy storage solutions. These solutions are aimed at enhancing energy management at telecommunication sites and enterprise environments, both domestically and globally. Secondly, the company operates in the electric vehicle supply equipment solutions business, providing smart charging systems equipped with innovative technology for residential, commercial, and public charging applications in India.

The company stands as one of the pioneers in the EV Chargers manufacturing sector in India. According to a CRISIL report, as of March 31, 2023, it held a market share of 60 per cent in the residential segment and 25 per cent in the public charging segment. By September 30, 2023, Exicom had installed over 61,000 EV chargers across 400 locations in India. Additionally, in its Critical Power Business, it commands a market share of 16 per cent in the DC Power Systems market.

Financials  

The company has consistently achieved growth year after year, except for FY23, during which there was a notable dip in revenue, although net profit showed robust gains. However, the revenue figures for H1FY24 indicate robust growth for the full FY24, and if this momentum persists, the annualized net profit is expected to surge by over 750 per cent year-on-year. The company boasts a return on equity (RoE) and return on capital employed (RoCE) of 13 per cent and 11 per cent, respectively, for the fiscal year 2023.

Valuation and outlook  

The issue is priced with a P/BV ratio of 4.21 times, calculated using its Net Asset Value (NAV) of Rs 33.70 as of September 30, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 24. Exicom Tele-Systems Ltd has significantly outperformed its listed peers in terms of valuation, while its return figures have remained consistent with those of its peers.

With a global emphasis on energy transition and declining manufacturing costs, the transportation sector is swiftly transitioning towards electrification. Given the future prospects of the electric vehicle (EV) industry in India and the government's steadfast commitment to EV development, the company is strategically positioned to leverage these opportunities. Hence, we advise investors to contemplate subscribing to the offering with a long-term perspective.