Dixon Technologies IPO review – All you want to know

Dixon Technologies is a manufacturer of consumer’s electronic products. Dixon Technologies is coming up with an IPO. They are going to introduce their initial public offer which will hit the primary market on 6^th September, 2017 and closes on 8^th September, 2017. The company aims to raise around Rs. 600 crore by offering shares at Rs 1,760-1,766 per equity share.

About Company

Dixon Technologies (India) Limited was incorporated as ‘Weston Utilities Limited’ at Alwar, Rajasthan, on January 15, 1993. They are the home-grown design-focused and solutions company engaged in manufacturing products in the consumer durables, lighting and mobile phones markets in India. Their different product portfolio includes

• Consumer electronics like LED TVs
• Home appliances like washing machines
• Lighting products like LED bulbs and tube lights, down lighters and CFL bulbs
• Mobile phones

The company provides some other services too like they repair and refurbishment services of set top boxes, mobile phones and LED TV panels. In India, they are the leading manufacturer of lighting products of CFL, LED bulbs, LED TVs and semi-automatic washing machines.

Dixon technologies serve some popular retail brands in India which includes-

• Panasonic India Private Limited
• Philips Lighting India Limited
• Haier Appliance Pvt. Ltd.
• Gionee
• Reliance Retail Limited
• Intex Technologies Ltd
• Mitashi Edutainment Pvt. Ltd
• Dish Infra Services Private Limited

They are an integrated end-to-end product and solution suite to original equipment manufacturers (“OEMs”) ranging from global sourcing, manufacturing, quality testing and packaging to logistics.

They are also an Original Design Manufacturer (“ODM”) of lighting products, LED TVs and semi-automatic washing machines in India. As an ODM, they develop and design products in-house at our R&D centre. Their in-house R&D centre, apart from undertaking electronics hardware designing, system architecture, mechanical design, component engineering and optics design, also assists their customers in cost reduction through product engineering.

Their R&D team consisted of 22 employees, including electrical engineers. They had 682 permanent employees and also employed around 4,030 contract labor at their manufacturing facilities

The firm has six manufacturing facilities which are located in the states of Uttar Pradesh and Uttarakhand. Out of their six manufacturing facilities, three are located in Noida in the state of Uttar Pradesh and manufacture CFL as well as LED lamps and drivers and mobile phones, while the other three are located at Dehradun in the state of Uttarakhand and manufacture CFL as well as LED lamps and drivers, electronic ballasts, LED TVs and washing machines.

Dixon technologies was incorporated in 1993 and, in 1994, they commenced manufacture of consumer electronics such as color televisions. In 2007, they commenced manufacturing of LCD TVs and subsequently progressed into manufacturing of LED TVs in 2010. They entered the lighting products segment in 2008 with the manufacturing of CFL products and gradually increased our product portfolio to LED products in 2016. In 2010, they started manufacturing semi-automatic washing machines. They also started providing reverse logistics services in 2008.

Qualitative Factors

They believe that the following business strengths allow them to successfully compete in the industry:

• Leading market position as a manufacturer in their key product verticals, namely, FPD TVs, washing machines, CFL and LED lights in India.
• Strong relationships with a diverse top-tier customer base
• Experienced Promoter and seasoned management team
• End to end solutions provider with dedicated research and development capabilities
• Flexible and cost-effective manufacturing capabilities
• Strong financial performance and stable cash flows.

Strategies

• Continue to focus on ODM model
• Continue to strengthen existing product portfolio and diversify into products with attractive growth and profitability prospects
• Development of their service offerings
• Expand existing relationships with customers into other product verticals
• Expansion of industrial footprint into new geographies
• Continue to strive for cost leadership

Objects of the Issue:

The Offer consists of a Fresh Issue and an Offer for Sale by the Selling Shareholders.

1. The Proceeds from the Offer for Sale -The proceeds from the Offer for Sale shall be received by the Selling Shareholders and Company shall not receive any proceeds from the Offer for Sale.
2. Objects of the Fresh Issue – Company proposes to utilize the Net Proceeds towards funding the following objects:
3. Repayment/pre-payment, in full or in part, of certain borrowings availed by the Company
4. Setting up a unit for manufacturing of LED TVs at the Tirupati Facility
5. Enhancement of our backward integration capabilities in the lighting products vertical at our Dehradun I Facility
6. Up gradation of the information technology infrastructure of the Company
7. General corporate purposes.

Financial Details

The revenue of Dixon has increased from 724 Cr in 2013 to 1644 Cr in 2017, giving a healthy growth of 22.7% CAGR. The profit have increased from 10 Cr in 2014 to 46 Cr om 2017, giving a CAGR of 46%. Based on  this, we can see that the company is growing at a healthy pace.

Earnings per share is Rs 44.5, so the price earning turns out to be 40 times at the higher price of the IPO. This may look expensive but company is growing at a high growth rate.

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