EPACK Durable IPO includes a fresh share sale of Rs 400 crore and OFS of up to 1,04,37,047 equity shares by promoter, promoter group and other selling shareholders, amounting to Rs 240 crore. EPACK Durable is an original design manufacturer (ODM) of room air conditioners (RAC). They also manufacture components such as sheet metal parts, injection moulded parts, cross-flow fans, and PCBA components that are actively used in the production of RACs.

About EPACK Durable:

• EPACK Durables was incorporated on 2019.
• They are the second largest room air conditioner (RAC) original design manufacturer (“ODM”) in India in terms of number of units (indoor units + outdoor units) manufactured in Fiscal 2023 through the ODM route.
• They starting as OEM for RAC brands. Then company has evolved into an ODM partner for RACs for customers.
• They have also diversified into small domestic appliances (“SDA”) market, which will help to smooth out the seasonality of the demand for RACs. In this segment the company currently design and manufacture induction cooktops, mixer-grinders, and water dispensers. 
• They design and manufactures complete RACs including window air conditioners, indoor units, and outdoor units for Split ACs with specifications ranging from 0.75 ton to 2 ton, across energy ratings and types of refrigerants.
• The company has vertically integrated manufacturing facilities at 3 locations at Dehradun- Uttarakhand, Bhiwadi-Rajasthan and Sri City- Andhra Pradesh.
• EPACK’s customers include 4 of the top 6 RAC brands in the Indian market.
• Company has long-standing relationships with several well-known Indian and global customers. The average relationship with RAC customers is 8.7 years and with SDA Customers is 6.3 years. 
• EPACK is one of the initial Indian RAC ODM companies to manufacture 5 mm copper tubing for the heat exchangers.
• Company is one of the initial Indian RAC ODMs to design and manufacture WACs (both fixed speed and inverter models) with R32 refrigerant.
• EPACK has a dedicated R&D team comprising of 57 full time employees, as on September 30, 2023.
• As of September 30, 2023, it had 807 employees on its payroll and additional. 1165 contract labourers.

EPACK Durable IPO: Financials

Anchor: EPACK Durable IPO

Total 18 participants in the anchor book.

EPACK Durable IPO: Salient Points

• The Indian RAC (Room Air Conditioners) industry has grown at rate of 8.8% and 11.2% in terms of volume & value respectively from Fiscal 2018 to Fiscal 2023 and is expected to grow at 12.1% and 15.1% by volume and value respectively during from Fiscal 2023 till Fiscal 2028.
• The net proceeds from the fresh issue:
  • Funding capital expenditure for expansion / setting of manufacturing facilities : (Rs. 230.0  cr
  • Repayment and / or prepayment, of certain outstanding loans of the Company: Rs. 80.0 cr.
  • General corporate purposes.
• EPACK Durable Ltd. (EDL) is the second largest room air conditioner original design manufacturer (ODM) in India in terms of number of units (indoor units + outdoor units) manufactured in FY23 through the ODM route. EPACK Durables held a 24 % market share in terms of domestically manufactured units by ODM in FY23.
• EPACK Durable’s customers include four of the top six RAC brands in the Indian market. Some of its customers for RAC products are Blue Star Ltd, Daikin Airconditioning India Pvt Ltd, Carrier Midea India Pvt Ltd, Voltas Ltd, Havells India Ltd, Haier Appliances (India) Pvt Ltd, Infiniti Retail Ltd, and Godrej and Boyce Manufacturing Co Ltd, among others
• For Small Domestic Appliances (SDAs) their customers include Bajaj Electricals Ltd, BSH Household Appliances Manufacturing Pvt Ltd, and Usha International Ltd, among others.

• Its foray into appliances portfolio could reduce the business fluctuation due to seasonality going forward.
• Company commenced operations with a single manufacturing unit in Dehradun in 2003, and have since expanded their manufacturing operations with Dehradun Unit II, Unit III and Unit IV, a new Bhiwadi Manufacturing Facility in Rajasthan and Sri City Manufacturing Facility in the south.
• EPACK financials versus its peers appear relatively weak. Stock’s valuation appears expensive compared to nearest peer PG Electroplast,
• After good growth for FY21 to FY23, it marked a setback in H1Fy24. This is in line with the general trend in the segment in which it operates. With IPO proceeds of Rs 230 crore for capacity expansion, some incremental business can be expected.
• Peers

• EPACK Durable, participated in the government’s PLI scheme for white goods for the manufacturing of  the airconditioner components. It has recognized an incentive of Rs. 15cr for FY23 and Rs. 7.5cr for H1 FY24. Management expected new claims would be disbursed by the end of FY24.
• EPACK has 1 registered patent in India for air conditioner with air sterilisation and has filed for the registration of 2 patents in India, in respect of (i) collar with optimized flared section for joining tubes in coil of heat exchanger, and (ii) air conditioning system having heat exchanger. Further the company has 10 registered designs, including for window air conditioner, mixer, blender, and water dispenser. 
• As per F&S report, EPACK Durable holds a market share of 24% (vs 46% of Amber) in the ODM space for RAC.
• In addition to existing facilities, the company plans to set up two new manufacturing facilities at (i) Salarpur Industrial Area, Bhiwadi, Rajasthan and (ii) Sri City DTZ, Andhra Pradesh. 
• Its new unit in South has gone on stream in December 2023. Starting of new plant apart from product portfolio expansion will provide opportunities due to lower penetration in RAC manufacturing in south India.
• EPACK Durable IPO is coming at a PE ratio of 39.9x (fy23 earnings) and 64x (fy24 annualized earnings).
• I am not quite sure If I will apply in EPACK Durable IPO but I may join in at the last moment. Though the last mainboard IPOs Jyoti CNC and Medi Assist have fared well on listing, some have faltered. As a result in recent times, investors have lost some faith in ability of mainline IPOs to give listing gains. However from a medium term perspective, company is in the right sector and thus may attract some attention. Its expansion of product capacity and portfolio, participation in PLI scheme of Govt is indicative of its foray into emerging electronics sector.
• GMP as heard on Social Media may be around Rs. 30.
• Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared 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. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.