Kaynes Technology Files DRHP With SEBI, To Raise Funds Via IPO

Mysore-based Kaynes Technology India Limited (KTIL), a leading end-to-end and IoT solutions enabled integrated electronics manufacturing player, having capabilities across the entire spectrum of electronics system design and manufacturing (“ESDM”) services, has filed its draft red herring prospectus (DRHP) for its initial public offering (IPO).

The issue with a face value of Rs 10 per equity share consists of a fresh issue of equity shares aggregating to Rs 650 crore, and an offer for sale of up to 7,200,000 equity shares by existing shareholders. The Offer is being made through the Book Building Process, wherein not more than 50% of the Offer shall be available for allocation to Qualified Institutional Buyers, not less than 15% of the Offer shall be available for allocation to Non-Institutional Bidders and not less than 35% of the Offer shall be available for allocation to Retail Individual Bidders.

The offer of sale comprises up to 3,700,000 equity shares by Ramesh Kunhikannan (“Promoter Selling Shareholder”) and up to 3,500,000 equity shares by Freny Firoze Irani (“Investor Selling Shareholder”). The offer also includes a reservation of up to Rs 1.5 crore for subscription by eligible employees.

The company, in consultation with the lead bankers to the issue may consider a further issue of equity shares including a rights issue, private placement, preferential offer, or any other method aggregating up to Rs 130 crore. If such placement is completed, the fresh issue size will be reduced.

The Company will use the net proceeds towards repayment/pre-payment in full or in part of certain borrowing availed by the company to the tune of up to Rs 130 crore, up to Rs 98.93 crore for funding capital expenditure towards expansion of existing manufacturing facility at Mysore and Manesar, up to Rs 149.30 crore for investment in subsidiary Kaynes Electronics and for setting up a new facility at Chamarajanagar, up to Rs 114.74 crore for funding working capital requirement and general corporate proposes.

Ramesh Kunhikannan, a technocrat founded Kaynes Technology as a sole proprietorship in 1989 and has over 33 years of expertise in the electronic manufacturing services business, is the company's Promoter and Managing Director. Kaynes was one of the first companies in India to offer design-led electronics production to original equipment manufacturers ("OEMs") using mature embedded design capabilities, according to a Frost & Sullivan report commissioned by the company. Among the listed space, Kaynes competes with Dixon Technologies Limited and Amber Enterprises Limited as mentioned in the DRHP.

Kaynes has more than three decades of experience in providing conceptual design, process engineering, integrated manufacturing, and life-cycle support for major players in the automotive, industrial, aerospace and defence, outer-space, nuclear, medical, railways, and Internet of Things ("IoT") industries, Kaynes is one of the leading companies in the ESDM space to offer optimised product realisation solutions to customers in flexible volumes and higher complexity products across industry verticals.

KTIL has eight strategically positioned production plants in India, in the states of Karnataka, Haryana, Himachal Pradesh, Tamil Nadu, and Uttarakhand, allowing it to service its customers efficiently and cost-effectively. It has a total capacity of approximately 600 million components as of December 31, 2021, with an exclusive line for "Green Manufacturing" compatible with Directive 2002/95/EC Restriction of Hazardous Substances ("RoHS"), as well as one design facility and two service centres.

As on March 31, 2022, Kaynes had an order book of Rs 1,516.63 crore, with orders from several customers across business verticals.

Kaynes is the first firm in the ESDM industry to be accredited for aerospace goods by the National Aerospace and Defense Contractors Accreditation Program ("NADCAP"), and one of the few Indian companies to maintain this accreditation. It has long-term partnerships with a big customer base that is diverse in terms of verticals and geographical locations. It served 313 customers in 20 countries for the nine months ended December 31, 2021, in verticals such as automotive, aerospace and defence, industrial, railways, medical, and IT / ITES.

For nine months ending December 31, 2021, Kaynes derives its revenue from business verticals which includes OEM – Turnkey Solutions – Box Build; OEM – Turnkey Solutions – Printed Circuit Board Assemblies; ODM; and Product Engineering and IoT Solutions representing 29.08%, 63.34%, 3.74% and 3.84% respectively.

Kaynes Technology clocked a profit of Rs 9.73 crore in the financial year FY21 against Rs 9.35 crore in the previous year, whereas revenue during the year FY21 increased 14.23% to Rs 420.63 crore from Rs 368.24 crore in the previous year, primarily driven by growth in the automotive and health care verticals.

Profit for the nine-month period ended December 2021 stood at Rs 21.82 crore on revenue of Rs 467.78 crore. Export sales accounted for 21.53 percent of revenues, Top 10 customers account for 51.92 percent, and revenue from the business verticals OEM – Turnkey Solutions – Box Build; OEM – Turnkey Solutions – Printed Circuit Board Assemblies; ODM; and Product Engineering and IoT Solutions account for 29.08 percent, 63.34 percent, 3.74 percent, and 3.84 percent, respectively, as of December 2021.

DAM Capital Advisors Limited and IIFL Securities Limited are the book-running lead managers and Link Intime India Private Limited is the registrar to the offer.