Contract electronics manufacturer Dixon Technologies Ltd, which counts Motilal Oswal as its private equity backer, on Friday filed its draft red herring prospectus with the Securities and Exchange Board of India for an initial public offering.
The IPO comprises a fresh issue of shares worth Rs 60 crore and an offer for sale of 3.75 million shares by promoters and Motilal Oswal Private Equity (MOPE) Investment Advisors Pvt. Ltd, the private equity arm of Mumbai-listed Motilal Oswal Financial Services Ltd.
MOPE, through India Business Excellence Fund and India Business Excellence Fund-I, will sell 2.64 million shares, according to the draft documents. This is equivalent to a 24.05% stake; the PE firm owns 30.06% stake in the Noida-based company.
VCCircle had reported on 5 May that the company was in advanced stages of filing its IPO proposal with the capital markets regulator.
The total size of the IPO is likely to be around Rs 500-600 crore ($77-94 million).
Dixon aims to use the fresh proceeds from the IPO to repay debt and set up an LED television manufacturing unit at its Tirupati facility. It will also use the money to enhance backward integration capabilities in the lighting products vertical, upgrade the IT infrastructure facility, and for general corporate purposes.
The company, formerly known as Dixon Utilities and Exports Pvt. Ltd, will join peers Centum Electronics Ltd, MIC Electronics Ltd and PG Electroplast Ltd on the stock exchanges.
Dixon’s planned listing will make it the first electronics component contract manufacturer to go public since PG Electroplast floated a Rs 121 crore IPO in September 2011.
Unlisted companies that Dixon competes with include Jabil Circuit India Pvt. Ltd, SFO Technologies Pvt. Ltd, Elin Electronics Ltd, Rangsons Electronics Pvt. Ltd and Amara Raja Electronics Ltd, the arm of $2.3 billion Amara Raja Batteries Ltd.
Dixon joins a growing list of companies gearing for IPOs this year. These include country’s largest stock exchange operator National Stock Exchange, small finance bank applicant Au Financiers (India) Ltd, cable operator GTPL Hathway, CX Partners-backed Security and Intelligence Services (India) Ltd and Motilal Oswal PE-backed GR Infraprojects Ltd among nearly two dozen companies.
Six companies have raised nearly Rs 5,000 crore so far this calendar year, extending the good run for IPOs after a blockbuster 2016 when fundraising by companies via initial share sales jumped to a six-year high of Rs 26,500 crore, data from SEBI show.
The IPO market in India picked up pace after four years of slow activity till mid-2014 when the BJP-led government took over. In 2015, 21 companies had raised about Rs 14,000 crore, as per stock-exchange data.
Here’s the snapshot of Dixon’s IPO
Issue:
The IPO comprises a fresh issue of shares worth Rs 60 crore, besides a secondary sale of 3.75 million shares by promoters and part exit by existing shareholder Motilal Oswal Private Equity (MOPE) Investment Advisors.
The company was earlier contemplating a large portion of the public issue to be a secondary market sale by promoters and shareholders. However, as such issues are difficult to market, there could be a small primary fundraising component, VCCircle previously reported quoting people close to the development.
Bankers:
The company hired IDFC Bank, IIFL Holdings, Motilal Oswal Investment Advisors and Yes Securities as book-running lead managers for the IPO.
Lawyers:
Khaitan & Co is the legal counsel to the IPO. Dhir & Dhir Associates is representing the promoters.
Company:
Dixon claims to be the largest firm in the electronic system design and manufacturing (ESDM) segment in the country by revenues, according to its website.
The firm jumped to the second position in FY2013-14, from fourth a year before, in the list of top ESDM companies in India with revenues of Rs 1,061 crore. Jabil Circuit was then India’s largest with Rs 1,970.46 crore in total revenues, according to Electronics Bazaar.
Dixon was founded in 1993 by Sunil Vachani, a former director at Indian Institute of Management Bangalore. Vachani also served as chairman of Electronics Software Export Promotion Council of India (ESC) besides being Counsel General of the Republic of Benin, a French-speaking West African nation.
Dixon focuses on consumer electronics, home appliances and lighting electronics products. It manufactures consumer durables and appliances, including digital televisions and set-top boxes, for domestic and global brands that are sold under its own Weston brand. The company counts Philips and Panasonic among its clients.
Financials:
Dixon reported a consolidated net profit of Rs 40.16 crore for the nine months ended 31 December 2016 on consolidated revenues (from operations) of Rs 1,844.45 crore, according to the draft documents.
The company posted a consolidated net profit of Rs 42.65 crore for FY2015-16 on revenues of Rs 1,389.41 crore.
Its net profit has annually grown at a compound annual growth rate of 192.65% from FY2012-13 through FY2015-16.
Dixon’s operating profit improved in FY2015-16 and FY2016-17 led by increased value-added offerings, a shift in business model and an enhanced traction in its refurbishing business.
Past funding, investments:
Dixon has raised funding in the past from private investors. In 2006, Brand Equity, the ad-for-equity investment arm of media firm Bennett Coleman and Company Ltd, acquired a 9.68% stake in Dixon for $1.5 million (Rs 7 crore). Dixon bought back Brand Equity’s stake in 2009.
In 2008, India Business Excellence Fund-I, a fund managed by Motilal Oswal Private Equity Advisors, invested $9.95 million (Rs 40 crore) in Dixon for a 22.86% stake.