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By Sonal Bhutra Mar 21, 2023 11:52:40 AM IST (Updated)
Higher inventory has also resulted in an increase in working capital to 90 days and the company is working on reducing the same to 70 days in the next 2-3 quarters.
Syrma SGS Technologies, one of India's leading Printed Circuit Board Assemblies (PCBA) manufacturer in India, is looking to utilise 70 percent of its IPO proceeds to expand its existing capacity.
The company is one of the leading PCBA manufacturers in India. This is the process which ensures a completed board where all the necessary electronic components are connected with each other
Syrma listed in August 2022 after an IPO through which it raised Rs 840 crore. Of these proceeds, 70 percent or Rs 550 crore will be used for expanding capacity. The company currently has 21 Surface Mount Technology (SMT) lines, which it plans to double by the end of financial year 2024. SMT is the method used in mounting electrical components directly onto the surface of a circuit board.
Syrma has recently commissioned facilities in Manesar and Chennai and it plans on setting up a unit in Hyderabad as well. The company has 13 facilities in place and expects the new facilities to have 80-85 percent capacity utilisation in the near-term.
Current cash on the books stands at Rs 550 crore.
The company boasts of clients like Eureka Forbes, Tata Power Europe, TVS, Hindustan Unilever, among others. Within the automotive segment, they are seeing higher traction from the Commercial Vehicles space. On the business front, nearly three-quarters of the company's revenue comes from the core business.
The automotive business contributes to 20 percent of the overall topline, while majority comes from the industrial business.
Syrma's revenue increased by over 40 percent in financial year 2022. While the expectation is that growth will slow down going forward, the company aims to keep growing. In fact, Syrma's revenue, operating profit (EBITDA) and net profit are already higher than financial year 2022 numbers within the first nine months.
Majority of the revenue comes from the domestic market while 46 percent comes from exports. Being an original equipment manufacturer contributes to majority of the revenue, while the rest comes from it being an original design manufacturer.
As of December 2022, the company's order book stood at Rs 2,100 crore.
Some of the segments did see a slowdown in the December quarter, largely led by weakness in exports.
On the supply chain front, 30-40 percent of the company's sourcing is local, while half of it comes as imports from China. In fact, 61.4 percent of the costs in financial year 2022 were towards imports. Therefore, more exposure towards exports is a challenge, and the company also sees headwinds in the form of slowdown in export markets and in segments like healthcare.
Higher inventory has also resulted in an increase in working capital to 90 days and the company is working on reducing the same to 70 days in the next 2-3 quarters.
Promoters hold 47.2 percent stake in the company, while fund houses like ICICI Prudential and Franklin also have a stake in Syrma. AIFs and FPIs are also stakeholders with 3.3 percent and 5 percent respectively.
The company currently trades at a valuation of 29.5x financial year 2024 Earnings per Share, which is at par with the industry average.