Avalon Technologies IPO Review

Avalon Technologies IPO looks to raise ~ ₹ 865 crore through this public offering. Out of this it plans to mobilise Rs 320 crore from fresh issuance of equity shares and Rs 545 crore through an offer for sale (OFS) of shares by promoters and existing shareholders. Chennai based Avalon Technologies is an end-to-end electronic manufacturing service solutions provider spread across geographic locations and has highly vertically Integrated Capabilities from Design to Manufacturing.

Issue Opens             3rd Apr’2023 
Issue Closes          6th Apr’2023
Issue  Size           Fresh Issue of Equity shares upto ₹320 Cr 
 and OFS upto ₹545 Cr
Issue Size  (shares0            20,843,373 – 19,839,449
Issue Size     (Total Cr.)          ₹ 865 Cr
Face Value              ₹ 2 
Price Band              ₹ 415 – 436
Bid Lot              34 shares 
QIB              75% of the offer 
NIB              15% of the offer 
Retail              10% of the offer 
BRLMs              JM Fin, DAM Capital, IIFL Sec, Nomura Fin
Registrar              Link Intime India Pvt Ltd        
Anchor Investors

Avalon Technologies has raised Rs 389 crore from 24 anchor investors. The anchor investors includes names like Nomura, Goldman Sachs, Ashoka India Opportunities Fund, Neuberger Berman Emerging Markets Equity Fund, HDFC MF, Whiteoak Capital, Mahindra Manulife Mutual Fund, Oaks Emerging Umbrella Fund Plc, Principal Funds Inc, Aditya Birla Sun Life Insurance Company, HDFC Life Insurance Company, Franklin India Mutual Fund. Out of total allocation of 89.27 lakh shares, 29.81 lakh equity shares were allocated to 5 domestic mutual funds through a total 10 schemes

About Avalon Technologies Limted

  • Avalon Technologies Limited was incorporated on November 3, 1999.
  • Avalon Technologies is one of the leading fully integrated Electronic Manufacturing Services (“EMS”) companies with end to end capabilities in delivering box build solutions in India.
  • Avalon Technologies provides a full stack product and solution suite, right from PCB design and assembly to the manufacture of complete electronic systems (“Box Build”), to certain global original equipment manufacturers (“OEMs”), including OEMs located in the United States, China, Netherlands, and Japan.
  • Company’s capabilities include PCB design and assembly, cable assembly and wire harnesses, sheet metal fabrication and machining, magnetics, injection moulded plastics and end-to-end box build of electronic systems.
  • It is one of the few EMS companies in India, that offer one-stop services from PCB design and analysis to new product development (“NPD”) and subsequent volume production. I has a focus on NPD as a means to build long-term customer relationships.
  • Avalon Technologies Limited is the holding company for three subsidiaries.
  • Avalon Technologies has 12 manufacturing units located across the United States and India:
    • 1 unit in Atlanta, Georgia,
    • 1 unit in Fremont, California,
    • 7 units in Chennai, Tamil Nadu,
    • 1 unit in Kanchipuram, Tamil Nadu,
    • 2 units in Bengaluru, Karnataka.
  • Their electronic manufacturing facilities comprise an aggregate of 66 production lines, consisting of 11 Surface Mount Technology (“SMT”) lines, 12 Through Hole Technology (“THT”) lines and 43 assembly lines.
  • .

Avalon Technologies IPO: Financials

Particulars / Rs. Lacs8mFY238mFY22202220212020
Revenue from Operations584.79541.4840.72690.47641.87
Revenue Growth (%)8.01%21.76%7.57%
EBITDA Margin (%)11.64%10.77%11.60%9.58%10.05%
Profit before Tax47.3953.5686.4328.8315.3
Net Profit for the period34.1942.368.1623.0812.33
Net Profit Margin (%)5.73%7.78%8.00%3.32%1.89%
Share Capital11.341.61.61.60 1.53
Net Worth147.8394.8787.1959.9546.57
EPS – Basic & Diluted (₹)6.16.7911.34.012.21
RONW (%)28.17%49.00%85.8640.3625.19
Net Asset Value (₹)26.3716.9815.611.198.93
Post Issue share Cap13.06
FV in Rs. 2
IPO price436
EPS FY2210.44
PE Fy2241.77
EPS Fy233 (ann)7.85
PE Fy23 (ann)55.51
Market cap in Lacs2847
Market Cap/sales3.39

Avalon Technologies IPO: Salient Points

  • Proceeds from the fresh issue would be used towards debt payment, funding working capital requirements and general corporate purposes
  • Its revenue from operations was Rs 840 crore, with an order book worth Rs 1,039 crore as of June 30, 2022.
  • Operating at capacity utilization of 60-65%
  • Company is in enterprise electronics with products having longer life than consumer.
  • It has dedicated production lines that are tailored to a few specific customers, like e-Infochips Pvt. and Kyosan India Pvt.
  • It has several global brands as customers both in India and overseas. Some of its marquee customers across the end-use industries that we cater to include Kyosan India Private Limited, Faiveley Transport Rail Technologies India Private Limited, a Wabtec Company, TransDigm Technologies India Private Limited, Zonar Systems Inc., and Collins Aerospace in the mobility industry, Caire Inc, in the medical industry, e-Infochips Private Limited and Haas Automation, Inc. in the industrial sector, TMEIC and Ohmium India Private Limited in the clean energy sector.


  • Change in import and export regulations.
  • unfavorable forex currency movements
  • availability of key input materials like semiconductors, ICs, MOSFET devices, transistors.
  • Competition
  • Products may experience rapid technological change,


CompanyFV CMP ( ₹)Revenues  Cr.NP Cr. NPMPENAVD/EROCE (%)marketcapMcap/sales
Avalon Technologies2436841688.1%5515.63.617.6%28473.4
Dixon Technologies 2289310,6971901.8%72.6167.730.721.9%17,2311.6
Amber Enterprises 1019284,2081112.6%55.96514.70.68.5%6,2191.5
Syrma SGS 102701,267796.2%62.641.570.416.2%4,7793.8
Kaynes Technology101039706425.9%14743.890.926.5%6,0418.6

Avalon Technologies IPO: Assessment

  • The EMS sector is a sizeable industry globally and in India.
  • The EMS market in India was valued at ₹1,469 billion (US$20 billion) in Fiscal 2022 and is expected to grow at a CAGR of 32.3% to reach a value of ₹4,502 billion (US$60 billion) in Fiscal 2026.
  • The EMS market in the United States was valued at approximately US$140 billion in 2021 and is expected to grow at a CAGR of 6.1% to reach US$188 billion by 2026.
  • India has a unique competitive advantage due to low labour costs, a diverse product offering and geographical diversification.
  • Avalon Technologies IPO size was reduced to Rs 865 crore from Rs 1,025 crore planned earlier due to a pre IPO placement
  • Avalon completed a total pre-IPO placement of Rs 160 crore consisting of 80 crore of primary or fresh issuance and Rs 80 crore of secondary share sales (OFS). The investors in this pre-IPO placement are UNIFI Financial (Rs 60 crore), Ashoka India Equity Investment Trust (Rs 60 crore) and India Acorn Fund (Rs 40 crore).
  • Avalon Technologies has a unique global delivery model, comprising design and manufacturing capabilities across both India and the United States.
  • Avalon Technologies is the only Indian EMS company with full-fledged manufacturing facilities in the United States, which gives them a unique competitive advantage in the North American markets.
  • Revenue by Region:
% Revenue by region8mFY238mFY22202220212020
  • 80% production is in India though 62% business is from US.
  • Labor intensive operations are done in India. Automated jobs done in USA.
  • 48% revenue is from complete products.
  • Its order book in the US (i.e., orders received directly by its US entity, namely Sienna) has been steadily increasing from ₹2,010.24 million as of March 31, 2020 to ₹3,271.03 million as of March 31, 2021 and further to ₹3,703.31 million as of March 31, 2022, representing 30.78%, 47.00% and 43.48% of its total income. As of November 30, 2022, its order book in the US increased to ₹4,933.82 million, representing 82.65% of its total income.
  • The EMS market in North America is benefitting from the US-China trade tensions that are causing a reshoring of manufacturing back to the United States
  • Its wide customer base across various sectors reduces our dependence on any one end-use industry and provides a natural hedge against market instability in a particular end-use industry.
  • Revenue by end user industry:
Revenue by end use industry (in ₹ million)8mFY238mFY22202220212020
Clean Energy1,388.831,044.541,726.931,234.301,026.19
  • It has a history of strong customer retention and have been growing its customer base. The customers which account large percentage of order intake are as old as 8-10 years.
  • It serves the established and long product lifecycle businesses, where prodcuts have long life and has lower volumes than consumer electronic segments but has slightly higher margins. Further it is increasing its footprint in clean energy sectors such as solar, electric vehicles, and hydrogen in the clean energy sector as well as digital infrastructure in the communications sector.
  • A robust order book of Rs 1190 plus crore as of November 30, 2022, provides comfort and is indicative of good prospects ahead.
  • PE ratio is 42x (FY22) and 55x (fy23 annualized basis) as its profit margin for the first eight months of FY22 has shown a decline.
  • Avalon Technologies has a high debt ratio compared to peers. Its market cap /sales is lower or comparable to peers like Syrma.
  • The business of the company is appealing, the prospects look good but it quite possible that despite a good promise, company in the short run may be fully priced and may consider it for Long term only.
  • I will only apply in Avalon Technologies IPO in small quantity if and only of there is good QIB demand on Day 3 which is not visible as of now.
  • Please do your own diligence as IPOs in past have not given much listing gains to investors and have many times ended in losses.

  • Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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