Blog

IKIO Lighting IPO consists of a fresh issue of equity shares worth up to Rs 350 crore and an offer-for-sale (OFS) of up to 90 lakh equity shares by promoter, Hardeep Singh and Surmeet Kaur. The company is looking to raise about Rs 607 crores through the IPO. The Noida based company is primarily an original design manufacturer (“ODM”) and supplies products to customers in LED lighting space for various OEMs with Signify-Philips accounting for a large chunk of it sales.

About IKIO Lighting :

• Incorporated in 2016, IKIO Lighting Limited is a manufacturer of light-emitting diode (LED) lighting solutions
• The company is an original design manufacturer which designs, develops, manufactures and supplies products to its customers who in turn further distribute them under their own brand names.
• Its LED lighting offering focuses on the premium segment and includes lighting, fittings, fixtures, accessories, and components.
• The company has four major product segments, namely: i) LED Lighting ii) Refrigeration Lights iii) ABS (acrylonitrile butadiene styrene) piping iv) Other Products.

• In the past three fiscal years, IKIO sold its products to over 900 domestic and six international customers.
• Stated in FY12, the LED lighting has seen SKUs under this segment increase to 1,189 LED lighting products during 9M FY23. Of these, over 753 SKUs are manufactured only for Signify-Philips.
• I also provides lighting solutions such as lights, drivers and controls to commercial refrigeration equipment suppliers under refrigeration light segment which started in FY16. major customers in this segment are Voltas Ltd., Frigoglass India and Western Refrigeration Pvt. Ltd.
• • Further the company also manufactures fan regulator & switch productsfor customers like Anchor Panasonic, Le-grand and Signify-Philips. It also manufactures and assembles products like light strips, moulding and fittings.
• IKIO also manufactures an alternative to polyvinyl chloride (PVC) piping called ABS piping that is primarily used by its US customers for plumbing applications in the recreational vehicles (RVs).
• The company as on December 31, 2022, had total annual installed capacity of LED Lights of 20.63 million pieces.
• Its new plant at Noida is expected to commence commercial production by Jan 2024.

Anchor Investors:

IKIO Lighting IPO: Financials

Salient Points

• IKIO Lighting Limited is primarily an original design manufacturer (ODM) with an overall experience of more than two decades in the electronics manufacturing services (EMS) space.
• In the nine months ended December 31, 2022 and in Fiscal 2022, Fiscal 2021 and Fiscal 2020, its revenue from operations on a proforma consolidated basis in the LED lighting category accounted for 86.05%, 86.78%, 87.26% and 85.21%, respectively.
• It derives a substantial portion of its revenue from, a single customer, Signify Innovations India Limited, erstwhile Philips India, and over 85% of our revenue is derived from our top twenty customers on a restated basis and a proforma consolidated basis for the nine months ended December 31, 2022 and Fiscal 2022
• In the nine months ended December 31, 2022 and in Fiscal 2022, Fiscal 2021 and Fiscal 2020, our revenue from operations on a proforma consolidated basis in the LED lighting category accounted for 86.05%, 86.78%, 87.26% and 85.21%, respectively.
• Key performance indicators:

Risks

• Derives a substantial portion of revenue from, a single customer, Signify Innovations India Limited, erstwhile Philips India, and over 85% of the revenue is derived from top twenty customers on a restated basis and a proforma consolidated basis for the nine months ended December 31, 2022 and Fiscal 2022.
• About 50% of its total raw materials are imported with 90% of imported raw materials coming from China.

IKIO Lighting IPO: Assessment

• According to Frost & Sullivan, during fiscal 2022, the Indian LED lighting market was valued at Rs21,702 crore ($2.89 billion) and is estimated to expand at a CAGR of 12.2 per cent to reach Rs33,800 crore ($4.5 billion) by 2026.
• LED lighting has grown from strength to strength over the last decade, mainly driven by energy efficiency regulations, widespread manufacturing, and reduced prices of LED light sources,
• IKIO enjoys high customer retention. In Fiscal 2022, the company derived approximately 93.56 per cent of restated revenues from operations from repeat customers. Its major OEM customers include Signify (Philips), Anchor, Panasonic, Legrend, Honeywell, Voltas and Western Refrigeration.
• During the same year, IKIO enjoyed relationships of over 3 years with seven out of these top ten customers apart from building an international customer base, primarily in the US.
• Company has developed sustainable ABS piping as an alternative to PVC piping, which is extensively used in plumbing systems for recreational vehicles in US they outfit. They also supply these customers with a number of products such as ABS piping, LED interior and exterior lights, switches, change controllers and solar energy solutions.
• As at January 31, 2023, its total outstanding borrowings amounted on consolidated basis to ₹1,515.53 million, on a consolidated basis.
• From the fresh issue proceeds, IKIO Lighting Limited will be utilizing Rs. 212cr for setting-up a new facility at Noida and another Rs. 50cr will be used towards repayment/prepayment of the certain borrowings.
• There is no strict comparable peer with business as that of the company. Dixon and Elin are into LED Tube lights but have other business as well.
• The company has shown steady growth in its top and bottom lines.
• The company intends to utilize the Net IPO Proceeds for the following objects
• Its PE ratio is 47x (fy23 earnings). There has been a steady growth in revenues and profits from the last few years.
• I expect it to give listing gains as well as do well thereafter.
• I intend to apply in IKIO Lighting IPO. The company is moving towards a diverse product basket with focus on high-margin areas, has Long-term relationships with leading industry customers, has a strong focus on R&D and established infrastructure with backward integration. This is backed with a strong and consistent financial performance and affairs of company are managed by experienced promoters and management team.
• GMP as reported on social media has been moving up and may be more than Rs. 100+.

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. 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.