Syrma SGS Technology Limited
Please refer to important disclosures at the end of this report
1
SSTL, founded in 2004, is a technology-focused engineering and design
company engaged in turnkey electronics manufacturing services (“EMS”),
specializing in precision manufacturing for diverse end-use industries,
including industrial appliances, automotive, healthcare, consumer products
and IT industries. It is one of the fastest growing companies amongst its peers.
Its manufacturing infrastructure enables SSTL to undertake a high mix of
products with flexible production volume requirements. SSTL is Leader in high
mix low volume product management and are present in most industrial
verticals. It is one of leading PCBA manufacturers in India, supplying to various
OEMs and assemblers in the market also amongst the top key global
manufacturers of custom RFID tags
Positives: (a) Established relationships with marquee customers across various
countries (b) Consistent track record of financial performance (c) Diverse and
continuously evolving product portfolio catering to various industries (d) Vertically
Integrated Manufacturing process increases cost efficiencies
Investment concerns: (a) Lack of long-term contracts with customers (b) Highly
competitive industry (c) High dependence on imports for its raw materials.
Outlook & Valuation: In terms of valuations, the post-issue P/E works out to
66.8x FY22 EPS (at the upper end of the issue price band). Company’s
consolidated PAT CAGR of ~15% over FY20-22 on back of acquisition. However,
on standalone basis the numbers are not impressive. SSTL has diverse product
portfolio, but we believe that these positives are captured in the valuations
commanded by the company. Thus, we have a NEUTRAL rating on the issue.
Key Financials
Y/E March (₹ cr)
FY'21
FY'22
Net Sales
438.0
1020
% chg
-
133
Net Profit
32
57
% chg
-
77
EBITDA (%)
10.7
9.3
EPS (Rs)
2.8
5.0
P/E (x)
78.3
44.2
P/BV (x)
10.4
4.3
ROE (%)
11.8
9.5
ROCE (%)
11.4
9.5
EV/Sales
5.6
2.6
Source: Company RHP, Angel Research
NEUTRAL
Issue Open: August 12, 2022
Issue Close: August 18, 2022
Offer for Sale: ` 74cr
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 47.4%
Public 52.6%
Fresh issue: `766cr
Issue Details
Face Value: `10
Present Eq. Paid up Capital: ` 138cr
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: ` 172.4cr
Issue size (amount): ₹ 840cr
Price Band: ₹209- ₹220
Lot Size: 68 shares and in multiple thereafter
Post-issue mkt. cap: * `3,722cr - ** `3,877cr
Promoters holding Pre-Issue: 61.47%
Promoters holding Post-Issue: 47.42%
*Calculated on lower price band
** Calculated on upper price band
Book Building
IPO NOTE
Syrma SGS Technology Limited
August 10, 2022
Syrma SGS Technology Ltd | IPO Note
August 10, 2022
2
Company background
SSTL is technology-focused engineering and design company engaged in
turnkey electronics manufacturing services (“EMS”), specializing in precision
manufacturing for diverse end-use industries, including industrial appliances,
automotive, healthcare, consumer products and IT industries. It is amongst the
fastest growing. The Company has a track record of technical innovation which
involves working with the engineering teams of our marquee customers, and
over the years, company has evolved to provide integrated services and
solutions to OEMs, from the initial product concept stage to volume production
through concept co-creation and product realization. Its manufacturing
infrastructure enables it to undertake a high mix of products with flexible
production volume requirements. SSTL is leader in high mix low volume
product management and is present in most industrial verticals. Further, SSTL
is one of the leading PCBA manufacturers in India, supplying to various OEMs
and assemblers in the market. The Company is also amongst the top key global
manufacturers of custom RFID tags
Product Portfolio:
1) Printed circuit board assemblies (“PCBA”): The PCBAs are used in
products manufactured in the automotive, medical, industrial, IT and
consumer products industries, and shall include box-build products.
2) Radio frequency identification (“RFID”): The RFID products are used in
products manufactured in the shipping, healthcare, manufacturing, retail
and fintech industries.
3) Electromagnetic and electromechanical parts, which include magnetic
products like chokes, inductors, agnetic filters, transformer as well as high
volume manufacturing assemblies: The electromagnetic and
electromechanical parts are used in products manufactured in the
automotive, industrial appliances, consumer appliances and healthcare
industries, among others.
4) Other products, which include motherboards, DRAM modules, solid state
drives, USB drives and other memory products.
Syrma SGS Technology Ltd | IPO Note
August 10, 2022
3
Issue details
The IPO is made up of Fresh issue of ₹766cr and offer for sale of 3,369,360 equity
shares aggregate up to ₹74cr making the total Issue size of ₹840cr.
Pre & Post Shareholding
(Pre-Issue)
(Post-Issue)
Particulars
No of shares
%
No of shares
%
Promoter
8,69,31,545
61.47
8,35,62,185
47.42
Public
5,44,79,411
38.53
9,26,66,953
52.58
Total
14,14,10,956
100.00
17,62,29,138
100.00
Source: Company, Angel Research
Objectives of the Offer
◼ To carry out the Offer for Sale of 3,369,360 equity shares aggregate upto
₹74cr.
◼ Rs 766cr proceeds from the fresh issue would be utilized as follows:
o Rs 403cr for capital expenditure and expansion
o Rs 131.58cr for working capital requirements
o Rest for General corporate purposes
Syrma SGS Technology Ltd | IPO Note
August 10, 2022
4
Key Management Personnel
Sandeep Tandon is one of the Promoter and the Executive Chairman of the
company. He has approximately 18 years of experience in the electronics
manufacturing sector. He has previously been associated with Celetronix Inc., USA
Jasbir Singh Gujral is one of the Promoter and the Managing Director of the
company. He is a director of SGS Tekniks Manufacturing Pvt Ltd
Sreeram Srinivasan is the chief executive officer of our Company. He was formally
appointed as the chief executive office of our Company on November 29, 2021. He
oversees the business operations and strategy functions of our Company. He holds
a Bachelor of Technology in metallurgical engineering from Indian Institute of
Technology, Madras, a Master of Science from North Carolina State University and
a Doctor of Philosophy from North Carolina State University. He has over 20 years
of experience in business operations. He has previously served as the vice president
(operations) of Rane Engine Valves Limited, the president & executive director of
Shanti Gears Limited, the managing director of Saint Gobain, Sekurit India Limited
and the chief executive officer of MTAR Technologies Private Limited.
Bijay Kumar Agrawal is the chief financial officer of our Company. He handles the
financial operations of our Company. He holds a master’s degree in business
administration. He has approximately 16 years of experience in finance and
business strategy. Before his association with our Company, he has previously been
associated with Motorola India Private Limited (through Manpower Services India
Private Limited), Times Internet Limited, Dalmia Bharat Limited and Omax Autos
Limited.
Syrma SGS Technology Ltd | IPO Note
August 10, 2022
5
Financial Summary
Income Statement (Consolidated)
Y/E March (₹ cr)
FY’21
FY’22
Net Sales
438
1,020
% chg
133%
Total Expenditure
392
925
Raw Material
282
719
Personnel
29
60
Other Expenses
81
147
EBITDA
47
94
% chg
102%
(% of Net Sales)
10.7
9.3
Depreciation& Amortisation
12
19
EBIT
35
75
% chg
116%
(% of Net Sales)
7.9
7.4
Interest & other Charges
5
7
Other Income
6
13
(% of PBT)
17.0
15.7
PBT
36
81
% chg
123%
Tax
8
27
(% of PBT)
21.2
33.1
Share in profit of Joint venture
3
3
PAT
32
57
% chg
77%
(% of Net Sales)
7.3
5.6
Basic EPS (Rs)
2.8
5.0
Source: Company, Angel Research
Syrma SGS Technology Ltd | IPO Note
August 10, 2022
6
Balance Sheet (Consolidated)
Y/E March (₹ cr)
FY’21
FY’22
Equity Share Capital
1
138
Reserves& Surplus
241
434
Shareholders’ Funds
242
572
Minority Interest
-
11
Total Loans
61
218
Other Liabilities
4
10
Total Liabilities
307
811
APPLICATION OF FUNDS
Net Block
81
261
Goodwill
-
118
Capital Work-in-Progress
0
39
Investments
92
41
Current Assets
265
665
Inventories
77
291
Sundry Debtors
128
272
Cash
30
37
Loans & Advances
-
-
Other Assets
30
65
Current liabilities
156
330
Net Current Assets
108
335
Deferred Tax Liabilities (net)
(1)
9
Other Assets
24
26
Total Assets
307
811
Source: Company, Angel Research
Syrma SGS Technology Ltd | IPO Note
August 10, 2022
7
Cashflow Statement (Consolidated)
Y/E March (₹ cr)
FY’21
FY’22
Profit before tax
36
81
Depreciation
12
19
Change in Working Capital
-16
-66
Interest / Dividend (Net)
4
5
Direct taxes paid
-10
-23
Others
-2
-1
Cash Flow from Operations
24
15
(Inc.)/ Dec. in Fixed Assets
-6
-79
(Inc.)/ Dec. in Investments
-89
-311
Interest Received
0
-3
Cash Flow from Investing
-94
-394
Proceeds from issue of Equity Shares
33
272
Issue of Preferrential Shares
70
0
Inc./(Dec.) in loans
-31
91
Dividend Paid (Incl. Tax)
0
0
Interest / Dividend (Net)
-5
-4
Cash Flow from Financing
68
358
Inc./(Dec.) in Cash
-3
-20
Opening Cash balances
31
3
Closing Cash balances
28
241
Source: Company, Angel Research
Key Ratios
Y/E March (₹ cr)
FY'21
FY'22
Valuation Ratio (x)
P/E (on FDEPS)
78.3
44.2
P/CEPS
56.8
32.9
P/BV
10.4
4.3
EV/Sales
5.6
2.6
Per Share Data (Rs)
EPS (Basic)
2.8
5.0
EPS (fully diluted)
2.8
5.0
Cash EPS
3.9
6.7
Book Value
21.2
51.2
Returns (%)
ROE
11.8
9.5
ROCE
11.4
9.5
Source: Company, Angel Research;
Syrma SGS Technology Ltd | IPO Note
August 10, 2022
8
Research Team Tel: 022 - 40003600 E-mail: [email protected] Website: www.angelone.in
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