IKIO Lighting Limited is an Indian manufacturer of light emitting diode ('LED') lighting solutions. They are primarily an original design manufacturer ('ODM') and design, develop, manufacture and supply products to customers who then further distribute these products under their own brands. They also work with the customers to develop, manufacture and supply products that are designed by the customers. The products are categorised as (i) LED lighting (ii) Refrigeration lights (iii) ABS (acrylonitrile butadiene styrene) piping and (iv) Other products. Company's LED lighting offerings focus on the premium segment and include lighting, fittings, fixtures, accessories and components. They provide lighting solutions (lights, drivers and controls) to commercial refrigeration equipment suppliers under the refrigeration light segment. They also manufacture an alternative to polyvinyl chloride ('PVC') piping called ABS piping that is primarily used by the US customers for plumbing applications in the recreational vehicles ('RVs') that they fit out. In addition, they manufacture and assemble other products including fan regulators that are designed by the clients; light strips, moulding, and other components and spares. The equipment and systems are used in various industries and products, including residential, industrial and commercial lighting. Company's largest customer is Signify Innovations India Limited, erstwhile Philips Electronics India Limited, which according to Frost & Sullivan in Fiscal 2022 had a 50% market share in India's functional decorative lighting category (including LED spotlights, LED down-lights and cove lights) and a 10% market share in India's true-blue decorative lighting segment (including chandeliers, wall lights, pendants, outdoor lights). In addition to Signify (Philips), they have Western Refrigeration Private Limited, Panasonic Life Solutions India Private Limited and Novateur Electrical & Digital Systems Private Limited as customers. In FY 22, company derived approximately 93.56% of the consolidated restated revenues from operations from repeat customers (defined as customers from which they have had revenues in the past three fiscal years). In the nine months ended December 31, 2022 and FY 22, they derived 73.63% and 78.81% of the proforma consolidated revenues from operations from repeat customers. In the nine months ended December 31, 2022 and in Fiscal 2022, the consolidated restated revenue from operations from the top ten customers were Rs 2,068.87 million and Rs 2,172.63 million, respectively, which represented 85.94% and 98.80%, respectively, of the consolidated restated revenues from operations. Company enjoyed relationships of over three years with seven out of these top ten customers. In addition, they are building an international customer base, primarily in the United States. Company's R&D department focuses on product designing, tools and mould designing, electronic circuit designing and prototype designing. Our R&D department independently develops ODM designs and verifies and develops OEM designs received from customers and converts such designs into deliverable products by improving the designs, recommending suitable raw materials and testing of trial products. As of February 28, 2023, the R&D team consists of 27 members, 14 of whom hold Bachelors of Technology (Electronics & Communication and Mechanical) and the remaining 13 have a diploma in electronics / electricals and graduate degree. In the nine months ended December 31, 2022 and in Fiscal 2022, Fiscal 2021 and Fiscal 2020, the R&D expenses on a consolidated restated basis were Rs 12.25 million, Rs 8.38 million, Rs 6.13 million, and Rs 9.00 million, respectively, which formed 0.51%, 0.38%, 0.38% and 0.64%, respectively, of the consolidated restated revenue from operations. Company has four manufacturing facilities with one located in the SIDCUL Haridwar industrial park in Uttarakhand and three in Noida in the National Capital Region. In line with the focus to provide end-to-end product solutions and to develop better control on the supply chain and improve the margins, they have backward integrated the major manufacturing processes. They have developed in-house capabilities so that they manufacture all mechanical components in house (save diodes and resistors). As of February 28, 2023, company had 1470 employees and 19 contract labourers. As per financial performance, IKIO Lighting Limited has posted total income / net profits of Rs 140.73 Cr / Rs 15.99 Cr (FY20), Rs 160.04 Cr / Rs 20.58 Cr (FY21) and Rs 220.72 Cr / Rs 28.01 (FY22) and Rs 243.18 Cr / Rs 34.58 Cr (9MFY23). So as per last three years data, company has shown good growth. Company has posted an average EPS of Rs 3.62 and average RoNW of 42.16% for last three fiscals. Issue is priced at a P/BV of 14.6 as per NAV of 19.48 as on 31.12.2022. If we attribute latest earnings of FY22 on fully diluted equity post issue, then asking price is at a P/E of around 78.63 and as per annualized FY23 earnings P/E is around 47.77, which looks fully priced. As per RHP, peers comparison is shown in above table . On BRLM's front, one lead managers is associated with this IPO, and have handled around 7 IPOs in last three fiscals.Motilal Oswal Investment Advisors Limited : This is 8th IPO from this BRLM. From last 7 IPOs, one opened below issue price and remaining opened above issue price or at par on the day of listing. As of now, from last 7 IPOs, 3 are trading below issue price and remaining are trading above issue price. ( As on 02.06.2023 ) As per financials, IKIO Lighting Limited has shown good growth, RoNW is 36.64% and P/E is respectively 78.63 and 47.77 as per FY22 and annualized FY23 earnings, which looks aggressively priced. Company is in LED manufacturing business which is highly competitive, but company has good market share. Also with expansion plan, company may maintain its growth in future. Performance of BRLM is average. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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