Elin Electronics IPO kicks off: Here's what brokerages say about the issue

New Delhi: The Rs 475-crore initial public offering (IPO) of Elin Electronics kicked off for subscription on Tuesday. The company's three-day issue will conclude on Thursday wherein it is selling its shares in the range of Rs 234-247 apiece.

The primary offer, with a lot size of 60 shares, consists of the issuance of fresh equity worth Rs 175 crore and an offer for sale (OFS) of Rs 300 crore from existing promoters and shareholders.

The net proceeds from the fresh issue worth Rs 88 crore will be used to repay debt while Rs 37.59 crore of money raised will be used for capital expenditure to upgrade and expand existing facilities at Ghaziabad in Uttar Pradesh and Verna in Goa.

Incorporated in 1969, Elin Electronics is a leading electronics manufacturing services provider. It manufactures and assembles a wide array of products and provides end-to-end product solutions.

For the year ended March 31, 2022, the company reported a net profit of Rs 39.15 crore with total revenue of Rs 1,094.67 crore. It reported a profit of Rs 20.67 crore with total revenue of Rs 604.74 crore till September 30, 2022.

50% of shares are reserved for qualified institutional buyers (QIBs), whereas 15% of shares are reserved for non-institutional investors (NIIs). The remaining 35% of shares will be allotted to retail investors.

Axis Capital and JM Financial Services are the book-running lead managers to the issue whereas KFin Technologies has been appointed as the registrar to the issue.

The majority of the brokerage firms are positive on the IPO and have suggested subscribing to it, citing strong financials, robust business model and attractive valuations.

Here's a look at brokerage recommendations:

Ashika Research
Rating: Neutral
Elin Electronics is a smaller player compared to Dixon technologies and Amber Enterprises which are in the same business, said Ashika Research. "Debt level is expected to reduce further post the IPO."

"It demands a P/E multiple of 29.7x based on H1FY23 fully diluted EPS. Given the valuation at a higher level, small scale of operation compared to the peers and muted financial growth, we have a 'neutral' view on this IPO," it said.

Reliance Securities
Rating: Subscribe
The issue is valued at 31.3x P/E, 16.8x EV/EBITDA and 1.2x EV/Sales, said Reliance Securities. "Venturing into new product segments is propelling OEMs to pursue EMS engagement, while the ODM model is also slowly gaining traction in India."

In view of its dual OEM and ODM-based business model, diverse products and services portfolio, healthy financials, focus on R&D and strong growth potential, given the large addressable market, we sugged subscribing to the issue, it said.

Religare Broking
Rating: Neutral
The company’s financials seem decent, wherein its revenue and PAT grew by 18% and 19.3% CAGR over FY20-22. On the valuation front, Elin P/E trades at 25x FY22 EPS, said Religare Broking.

However, the brokerage firm is neutral on the issue given that it operates in a highly competitive market and concentration of revenue with a few clients.

Canara Bank Securities
Rating: Subscribe
"The company has a long-term relationship with its clients. The company has been able to maintain its EBITDA margin in the range of 7-8%. The promoter holding would reduce from 54% to 33% post issue," said Canara Bank Securities.

"Its client concentration is reducing but it still seems to be a concern despite its presence in a wide array of products. In comparison to its peers, the issue is available at a relatively attractive valuation," it added with a subscribe rating.

Hem Securities
Rating: Subscribe
The company has entrenched relationships with a marquee customer base and a high degree of backward integration, resulting in higher efficiencies, enhanced quality of products and customer retention capability, said Hem Securities.

"Its consistent and strong track record of financial performance is making this issue attractive," it added with a subscribe rating on the issue.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)