Dixon Technologies Rs 600 crore IPO opens; should you subscribe?

By: | Published: September 6, 2017 11:27 AM

Dixon Technologies Rs 600 crore IPO opened today for subscription. We take a look at the issue from the investors' point of view.

The public issue will remain open for QIBs, non-institutional investors and retail investors for two days starting from 6 September to 8 September. (Image: BSE)

Dixon Technologies Rs 600 crore IPO opened today for subscription. The initial public offer contains a fresh issue of Rs 60 crore and an offer for sale of up to 3,053,675 equity shares (including anchor portion of 1,018,027 equity shares). The public issue will remain open for QIBs, non-institutional investors and retail investors for two days starting from 6 September to 8 September. The technology firm is planning to spend the proceeds on capacity expansion and debt repayment.

Experts take — HDFC Securities

  • Strengths: HDFC Securities has said that DTIL is leading market position in key verticals along with its strong relationships with a diverse top-tier customer base and experienced promoter and seasoned management team. It further added that DTIL is an end to end solutions provider with dedicated research and development capabilities, it also has flexible and cost-effective manufacturing capabilities. HDFC Securities stated that Dixon Technologies has strong financial performance and stable cash flows as over the last five fiscals ended March 31, 2017, it achieved a CAGR of 33.78% in revenue from operations (net) and 44.36% in EBITDA.
  • Concerns: However the research and brokerage house HDFC Securities has also raised few concerns such as Highly dependency on certain key customers for a substantial portion of revenues and it didn’t obtained firm and long-term volume purchase commitments from customers. HDFC Securities added that the markets in which customers compete are characterized by consumers and their rapidly changing preferences. Moreover, business and results of operations are dependent on the contracts that it enter into. DTIL depends on certain suppliers for raw materials and other components and also the production capacity may not correspond precisely to its production demand which may affect the results of operations.

IPO details

The company expects to raise Rs 60 crore from the primary round of equity sale and Rs 540 crore from offer for sale. “Post listing, 52% of Dixon will be held by promoters and friends, 8% by employees, 5% by Motilal Oswal and 35% will be with the public,” PTI reported citing Dixon Technologies MD Atul B Lall. The initial public offer of Dixon IPO has a price band of Rs 1,760-1,766 per share with a face value of Rs 10 each. The book running lead managers of the issue are IDFC Bank Limited, IIFL Holdings Limited, Motilal Oswal Investment Advisors Limited and YES Securities (India) Limited.

IPO proceeds

“In the primary raise, the money will be spent on setting up LED TV capacity in Tirupati, expansion of our backward integration of lighting business, debt repayment, IT infrastructure and the rest will be used for general corporate purposes,” MD Atul B Lall added. Dixon plans to repay a debt of Rs 22 crore, invest Rs 7.57 crore in setting up its seventh manufacturing unit for LED television in Tirupati. The company will use Rs 8.85 crore for producing parts of LED lights at its Dehradun plant.

Financials

The revenue of Dixon Technologies jumped by about 82% to Rs 2,456 crore at the end of 2016-17, from Rs 1,344 crore a year ago, aided by the mobile phone segment. Dixon Technologies had registered about 20 % increase in its consolidated profit at Rs 50.4 crore in 2016-17, from Rs 42 crore in the previous fiscal.

Business profile

Dixon Technologies (India) Ltd is a home grown design-focused and solutions company engaged in manufacturing products in the consumer durables, lighting and mobile phones markets in India. The company is an electronic contract manufacturer for Panasonic India, Philips Lighting India, Intex technologies, Gionee and Surya Roshini, among others. Dixon Technologies also provides solutions in reverse logistics i.e. repair and refurbishment services of set top boxes, mobile phones and LED TV panels. Dixon has six manufacturing facilities at present. Three plants are located in Noida and Dehradun each.

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