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Thursday, August 31, 2017

Dixon Technologies IPO - Details and review and allotment status

About Dixon Technologies 
Dixon IPO Allotment status

#Dixon Technologies is known as the largest home grown design-focused and solutions company engaged in contract manufacturing products in the consumer durables, lighting and mobile phones markets in India. MOPE (Motilal Oswal Private Equity - IBEF Fund) invested Rs. 40 crore in the company for 24.31% stake in July 2008. 
Dixon IPO Allotment status
Their product portfolio includes - 
(i) consumer electronics like LED TVs; 
(ii) home appliances like washing machines; 
(iii) lighting products like LED bulbs and tubelights, downlights and CFL bulbs; and 
(iv) mobile phones. 

They also provide solutions in reverse logistics i.e. repair and refurbishment services of set top boxes, mobile phones and LED TV panels. As per the Frost & Sullivan Report, they are the leading manufacturer of lighting products of CFL, LED bulbs, LED TVs and semi-automatic washing machines in India. Their key customers include Panasonic India Private Limited, Philips Lighting India Limited, Haier Appliance (I) Pvt. Ltd., Gionee, Surya Roshni Limited, Reliance Retail Limited, Intex Technologies (I) Ltd., Mitashi Edutainment Pvt. Ltd., Dish Infra Services Private Limited. They are a fully integrated end-to-end product and solution suite to original equipment manufacturers (“OEMs”) ranging from global sourcing, manufacturing, quality testing and packaging to logistics. They are also a leading Original Design Manufacturer (“ODM”) of lighting products, LED TVs and semi-automatic washing machines in India. As an ODM, they develop and design products in-house at our R&D centre. They manufacture and supply these products to well-known companies in India who in turn distribute these products under their own brands. 

Key Financials

                                                                         In Crores*

Financial Year
Fy 13
Fy 14
Fy 15
Fy 16
Fy 17
Profit margin

About the IPO

  • The price band for the offer, fixed at Rs 1,760-1,766, according to RHP
  • The issue to open on September 6 and close on September 8
  • IPO includes fresh Issue of shares worth 60 crore and offer for sale for 540 crore (for MOPE)
  • Market lot – 8 Shares
  • The script to be listed in BSE and NSE
  • Issue has allocation quota of 50% for QIBs, 15% for HNIs and 35% for retail category

Promoter and Executive Chairman, Sunil Vachani (holding 43.97%) and seven investors are looking to sell 30.5 lakh equity shares, amounting to Rs 540 crore at the upper end of the price band, while 3.4 lakh equity shares worth Rs 60 crore will be in the form of fresh issuance, the draft prospectus said.

IPO Proceeds to be used for –

  • Private Equity Firm MOPE to exit with Rs. 540 crore
  • To repay debt,
  • Set-up an LED manufacturing unit at Tirupati  
  • Strengthen the lighting products vertical with backward integration capabilities at Dehradun facility
  • Upgrade information technology infrastructure
  • General corporate purposes.

Mymoneystreets take

#DIXON IPO - Dixon is B2B player which works with all leading consumer electronics companies(Phillips, Panasonic, Haier, Dish TV, Gionee has no direct listed competitor to compare with.  It has a leadership position in the segment it works in and holds strong relations with major Consumer durable and Electronics Players. They have strong R&D centre. The majority part of the IPO proceed will go to MOPE, remaining part will be invested in other mentioned areas.

#Dixon Technologies has consistently posted revenue growth and PAT in double digit over 5 years. This is a fully priced IPO, at the P/E of 39 to 47 at the offer price in the lower and higher band assessed on FY17 financials. Companies in this segment run on very thion margin, but have a high and consistent volume growth. The company has good return ratio and high asset turnover. Stellar growth and high-return ratio deserves premium and market historically rewarded such companies with higher PE. 

This IPO is good for investors with medium to high risk appetite and long-term view. Wouldn’t recommend this IPO for listing gains.

HappyLoan – to facilitate dreams come true

View on the industry – Consumer electronic markets including – lights, waching machines, TV industry, is seeing a huge growth over a decade. The growth in the consumer electronics market in India has interestingly brought about gradual but radical change in the suppliers composition. The market which was dominated by tier-I players witnessed increasing share of tier-II players. The factor behind their increasing acceptance has been the availability of technology and regional presence. India is experiencing a positive change in producing locally an advantage over Chinese imports in many of the segments under discussion. The industry in discussion is expected to see considerable growth over next 5 years.

Book Running lead managers -
IIFL Holdings, IDFC Bank, Motilal Oswal Investment Advisors and Yes Securities are the book running lead managers to the issue. Four merchant bankers associated with this issue have handled 22 public issues in past three years out of which 8 issues closed below the IPO on listing date.

Some of the Risk factors would be as follow us - 

Risk Factor 1. They are highly dependent on certain key customers for a substantial portion of their revenues. Loss of relationship with any of these customers may have a material adverse effect on their profitability and results of operations. 
  • Action undertaken by the government to tax the business of theirs or that of their customers 
  • Reduced consumer spending on discretionary items in their customers’ key markets
  • Recession in India in which their  key customers’ operate their businesses 
  • Loss of market share of our key customers’ products which are manufactured by us; 
  • Failure of key customers’ products to gain widespread commercial acceptance; 
  • Key customers’ inability to effectively manage their operations or also seeing a change in their management or constitution which may render us not being a preferred choice for manufacturing products for them; and 
  • Changes in laws affecting their customers to operate profitably
Risk Factor 2. They do not obtain firm and long-term volume purchase commitments from their customers. If their customers choose not to renew their agreements with us or continue to place orders with them, their business and results of operations will be adversely affected.

Risk Factor 3.The markets in which their customers compete are characterized by consumers and their rapidly changing preferences, advancement in technology and other related factors including lower manufacturing costs and therefore as a result their Company may be affected by any disruptions in the industry

Risk factor 3: They may, from time to time, they look for opportunities to enter strategic alliances, acquire businesses or enter into joint venture arrangements. Any failure to manage the integration of the businesses or facilities post such acquisition or joint venture may cause profitability to suffer

Risk factor 4: They may be subject to financial and reputational risks due to product quality and liability issues which may have an adverse effect on their business, financial condition and results of their operations

Disclaimer - This review is not to be taken as recommendation to BUY. This should be used for information purpose only

HappyLoan – to facilitate dreams come true

Dixon IPO Allotment status

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