Initial public offering (IPO) by Syrma SGS Technology got subscribed 37 per cent on the first day of the offer till 5 pm (IST). The public offer received bids for 1,05,17,900 shares on the first day of IPO against 2,85,63,816 shares offered by the company. It has fixed a price band of Rs 209-Rs 220 for the ongoing public offer which will conclude on August 18. The domestic equity market will remain shut on August 15 on account of Independence Day.
The quota reserved for retail and non-institutional investors got subscribed 69 per cent and 13 per cent. Syrma, which is aiming to garner around Rs 840 crore through IPO, is one of the leading electronics system design and manufacturing company with a focus on technology-based solutions and original design manufacturer business. The company’s business model starts from product concept design and focuses on every segment of the overall industry value chain.
The IPO is a combination of a fresh issue and an OFS portion. The company will not receive any proceeds from the OFS portion. Of the fresh issue net proceeds, Rs 403 crore will be used to fund the capital expenditure requirement and the rest Rs 131.6 crore will be utilised for funding the working capital requirement of the company. Select brokerages have given a ‘Subscribe’ rating to the issue. Here’s what they have to say.
Choice Broking: Subscribe with Caution
In May 2022, Syrma has done a pre-IPO placement of around 3 per cent equity at Rs 290 per shares. At a higher price band, the IPO is valued at 24.1 per cent discount to the pre-IPO placement price, which may be considered favourable by the retail investors. But the company has demanded an EV/Sales multiple of 2.5 times (to its FY22 proforma consolidated sales), which is at a premium to the peer average. Thus, the issue seems to be fully priced. Considering the high growth potential in the electronic manufacturing sector, Choice Broking has given a “Subscribe with Caution” rating to the issue.
Hem Securities: Subscribe
The company is bringing the issue at P/E multiple of 68 times on post issue FY22 PAT basis. Syrma SGS is one of the leading design and electronic manufacturing services companies and has a consistent track record of financial performance. It is a diversified and continuously evolving and expanding product portfolio and service offerings catering to customers across various industries, backed by strong R&D capabilities. Also the company has established relationships with marquee customers across various countries and state-of-the-art manufacturing capabilities supported by a global supplier network, with a focus on vertical integration.
Hensex Securities: Subscribe
The brokerage gave a ‘Subscribe’ rating to the issue as IPO is fairly priced. The company is led by a management team with extensive experience in the EMS sector with a proven track record of performance. Their management team has developed strong working relationships with their employees, which adds to their stability and long-term growth.
Asit C Mehta Investment Intermediates: Subscribe
With its superior product mix, strong R&D capabilities, and adding capacities, the brokerage believes Syrma is well placed to capitalise on domestic and global opportunities. At the upper price band, the stock is priced at 50.71 times its FY22 EPS of Rs 4.34 (based on fully diluted post issue equity). Asit C Mehta Investment Intermediates recommends subscribing to the issue from a listing gain perspective.
KR Choksey: Subscribe
As per the prospectus, the valuation looks reasonable considering the average industry P/E of 65.5 times. The brokerage believes the increasing scope of the EMS sector and the company’s diverse product portfolio is ideal for capturing the growth opportunity for the company. Innovation & R&D remain the key factors for growth for Syrma. The company currently has a reasonable valuation compared to its peers.