IKIO Lighting IPO sees 66.3 times buying on final day; QIB portion booked 164 times

The maiden public issue of IKIO Lighting has received overwhelming response from all type of investors as they bought 66.29 times the offer size on the final day of bidding on June 8.

We have seen bid for 100.92 crore equity shares, so far from investors, against an IPO size of 1.52 crore shares, according to data available on exchanges.

High net-worth individuals, who will get 15 percent of the IPO pie, were in the forefront for providing healthy support to the offer, buying shares 63.35 times the allotted quota, while retail investors have bid for 13.86 times the reserved portion.

Qualified institutional buyers, who have 50 percent reservation in the public issue, have bought 163.58 times the portion.

The offer was subscribed 6.83 times till second day of bidding, June 7.

The Noida-based LED lighting solutions provider plans to raise Rs 606.5 crore from the public issue at the upper price band of Rs 270-285, comprising a fresh issuance of shares worth Rs 350 crore, and an offer-for-sale of Rs 256.5 crore by promoters.

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From the fresh issue net proceeds, IKIO Lighting will utilise Rs 212 crore for setting-up a new facility at Noida and another Rs 50 crore for repaying debts.

Most of brokerages have given thumbs up to the offer citing attractive valuations, healthy financials, niche in functional decorative lights, commercial refrigeration lighting and recreational vehicles.

Also read: See no competition from Chinese manufacturers; order book from exports to expand: IKIO Lighting

“At higher price band, IKIO is demanding a P/E multiple of 43.6x (to its restated FY22 EPS of Rs 6.5), compared to the peer average of 94.6x. Based on its FY23 estimated earnings, the demanded P/E is 32.7x, which is at discount to peer’s prevailing TTM P/E multiple of 43.2x. Thus we assign a “subscribe” rating for the issue,” Choice Broking said.

IKIO’s products were categorized into four segments, namely, LED lighting, refrigeration lights, ABS (acrylonitrile butadiene styrene) piping and other products.

On the back of population growth, rapid urbanization and improved demand for environmentally sustainable & cost-effective lighting solutions, the market of LED lighting has increased rapidly in the recent years. As a result, over FY18-22 the domestic LED lighting market has increased by 12.4 percent CAGR to Rs 21,708 crore.

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Further, with improved applications across the residential, commercial and industrial areas, the domestic LED lighting market is expected to increase by 11.7 percent CAGR over FY22-26E to reach a size of Rs 33,820 crore.

The electronics manufacturing services (EMS) market supporting the domestic LED lighting market has increased by 21.5 percent CAGR over FY18-22 to Rs 4,800 crore and is expected to grow by 27 percent CAGR over FY22-26E to a size of Rs 12,500 crore.

Anand Rathi has also given a subscribe rating to the offer as IKIO’s ability to offer end-to-end solutions and its backward-integrated manufacturing have resulted in a strong business model with healthy RoEs (return on equity) despite operating on a smaller base than its peers, which cater mainly to the mass-market needs of leading brands.

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Mainly on the back of improved backward integration, continued higher demand of its products and addition of new products line for the exports market in FY22, IKIO reported a consistent profitable growth in the business (except in the Covid-19 year i.e. FY21) over FY20-22.

During 9M FY23, the company reported a proforma consolidated topline of Rs 328.6 crore, while EBITDA and PAT margin of 22.3 percent and 15.6 percent, respectively. “Based on our quick estimate, over FY22-25 topline is expected at grow by 25 percent CAGR to Rs 647.5 crore, with 63bps and 54bps expansion in the EBITDA and PAT margin respectively. RoIC and RoE is expected at 13.8 percent and 14.4 percent, respectively, in FY25E,” Choice Broking said.

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