Kaynes Technology India Limited was incorporated in 2008. It is an end-to-end and IoT (Internet of Things) solutions enabled integrated electronics manufacturing player, having capabilities across the entire spectrum of electronics system design and manufacturing (ESDM) services. They provide conceptual design, process engineering, integrated manufacturing and life-cycle support for major players in the automotive, industrial, aerospace & defence, outer-space, nuclear, medical, railways, IoT, information technology and other segments. The company operates in four business verticals- OEM box build, OEM printed circuit board assemblies, ODM and product engineering & IoT solutions. They have 8 strategically located manufacturing facilities across India.

ABOUT THE COMPANY – KAYNES TECHNOLOGY INDIA LIMITED

Kaynes Technology India Limited has 8 manufacturing, 2 servicing and 1 each design and packaging & dispatch facilities in India. It has four business verticals with major revenue contribution from printed circuit board segment which is an OEM (Original Equipment Manufacturer).
As on 30th June 2022, the order book stood at ₹2,266 crore, with orders from several customers across business verticals. Currently, they are involved in several projects in different business verticals like smart-meters, automotive lighting, electronic control units, hand-held diagnostic hardware, IOT driven smart solutions, dispensing solutions and avionic electronics.
They generate a small portion of their revenue through exports (12.7%) in countries like Europe, North America, South East Asia, etc.
The company operates in 7 industry verticals with major revenue coming from automotive and industrial verticals. In Q1 FY23, it served 229 customers in 21 countries.
The average order size per customer stands at ~₹55.3 lakhs. The top 10 customers contributed ~63% to the revenue.
As of 30th June 2022, they work with over 871 vendors and source materials from various regions including North America, Europe, Singapore as well as locally within India. It doesn’t rely on single source or vendor for components, instead, have alternative sources for vendors for each component category. It utilise specialized dealers for niche verticals.
The company plans to focus on vertical expansion, expand its customer base & manufacturing facilities, improve operational efficiency through backward integration and pursue inorganic growth

SECTOR OUTLOOK – KAYNES TECHNOLOGY INDIA LIMITED

In the total ESDM market, EMS model accounts for approximately 80%, while ODM model accounts for the remaining 20%.
The total addressable ESDM market in India was valued at ₹2,65,400 cr in FY21. However, the contribution of Indian ESDM companies is around 40%, which is valued at ₹1,06,900 cr.
Most OEMs prefer engaging ESDM partners for contract manufacturing, but the ODM model is slowly gaining traction in India, where OEMs collaborate with ODMs on product development. Many ESDM players are gradually expanding to provide complete design services in addition to contract manufacturing.

COMPETITIVE LANDSCAPE – KAYNES TECHNOLOGY INDIA LIMITED

OBJECTS OF THE OFFER – KAYNES TECHNOLOGY INDIA LIMITED

The company proposes to utilize the net proceeds towards funding the following objects:

Repayment/ prepayment, in full or part, of certain borrowings availed by the company
Funding capital expenditure towards expansion of their existing manufacturing facility at Mysuru, Karnataka, and near the existing manufacturing facility at Manesar, Haryana
Investment in our wholly owned subsidiary, Kaynes Electronics Manufacturing Private Limited, for setting up a new facility at Chamarajanagar, Karnataka
Funding working capital requirements

PROPOSED UTILISATION OF NET PROCEEDS – KAYNES TECHNOLOGY INDIA LIMITED

RISK FACTORS

The top 10 customers contribute to ~63% of the revenue in Q1 FY23. Further, there has been a decline in new customer additions in last three fiscal. They do not have any long-term supply agreement with its customers. So, the loss of any of the customer or reduction in demand could adversely impact the revenue.
They rely on the supply of semi-conductor from the overseas market for manufacturing purposes. ~64.5% of raw materials from the total purchases are imported. So, any shortage or currency fluctuations would have a material impact on the financials. Further, most of the semiconductor demand is now fulfilled by imports from the United States, Japan, and Taiwan and any potential conflict between China and Taiwan may result in disruption in the supply chain of semiconductors and lead to shortages of the same.
Though the company offers products for various industries but ~64% of the revenue comes from automotive and industrials. The industrials segment gets impacted due to seasonality.
As on 30th June 2022, they have a contingent liability worth ~₹97 cr, which is ~46% of the net worth. These liabilities mainly pertain to bills discounted with banks set off against trade receivables of ~₹45 cr and bond executed for customs/central excise amounting to ~₹35 Cr.

PROMOTER BACKGROUND AND SHAREHOLDING

The promoters of the company are as below-

Ramesh Kunhikannan (79.9%)
Savitha Ramesh (0.04%)

Ramesh Kunhikannan also Managing Director of the company. He has been associated with the company since incorporation. He has over 33 years of experience in the electronic manufacturing services industry.

He oversees the management function of the company and together with their senior management is responsible for the implementation of strategy in respect of such management function.

STATEMENT OF PROFIT AND LOSS

STATEMENT OF ASSETS AND LIABILITIES

STATEMENT OF CASH FLOW

KEY METRICS

SWOT ANALYSIS

The company is into ESDM services. It operates via four business verticals with major revenue coming from OEM- PCBA segment. The company mainly has a domestic presence and provides services to different industry verticals.
The company plans to focus on vertical expansion, expand its customer base & manufacturing facilities, improve operational efficiency through backward integration and pursue inorganic growth.
Due to the competitive nature of the industry it operates in, the profitability ratios are subject to downward pressure. Additionally, any cost escalations in the current inflationary environment would contract the margins.

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KAYNES TECHNOLOGY INDIA LIMITED – IPO