IKIO LIGHTING LIMITED Has Filed DRHP for an IPO with SEBI on 03.10.2022

IKIO LIGHTING LIMITED Has Filed DRHP for an IPO with SEBI on 03.10.2022

IKIO Lightning Limited filed DRHP with SEBI on 3 October to raise funds through the stock market. The IPO comprises both Fresh Issue  and Offer for Sale. The size of Fresh Issue is up to Rs. 350 crore whereas the OFS of up to 7,500,000 Equity Shares. 

Business Model of Company 

IKIO Lightning Limited is  an Indian manufacturer of light emitting diode (LED) lighting solutions. The Company is focused on sustainability and providing low energy LED products to fulfill the needs of customers and meet its sustainability goals. The Company is primarily an original design manufacturer (ODM) and design, develop, manufacture and supply products to customers who then further distribute these products under their own brands. The Company also works with the customers to develop, manufacture and supply products that are designed by  customers.

The products are categorized as (i) LED lighting; (ii) refrigeration lights; (iii) ABS (acrylonitrile butadiene styrene) piping; and (iv) other products. The Company’s LED lighting offerings focus on the premium segment and include lighting, fittings, fixtures, accessories and components. The Company provides lighting solutions to commercial refrigeration equipment suppliers under the refrigeration light segment. The Company also manufactures an alternative to polyvinyl chloride (PVC) piping called ABS piping that is primarily used by  US customers for plumbing applications in the recreational vehicles that they fit out. In addition, the company manufactures and assembles other products including fan regulators that are designed by its clients; light strips, moulding, and other components and spares. 

 Who is the Management of the Company?

According to DRHP filed with SEBI, Following is the list of management of Ikio Lightning Limited-

(i) Hardeep Singh is the Chairman and Managing Director of the Company. He is the founder and one of the Promoters of the Company. He has been associated with the Company since its inception. He has completed his Higher Secondary Education and has more than two decades of experience in the manufacturing of television kits, electronic components and LED lighting. He has been honored by Philips with the “Game Changer” Award for LED Lighting Production.

(ii) Surmeet Kaur is the Whole-time Director on the Board and one of the Promoters of the Company. She holds a bachelors’ degree in Arts (Honors) from University of Delhi. She has been associated with the Company since inception and is responsible for management of Human Resources.

Why is the company raising funds via IPO?

The Selling Shareholders will be entitled to their respective portion of the proceeds of the Offer for Sale after deducting their proportion of the Offer related expenses and relevant taxes thereon. The Company will not receive any proceeds from the Offer for Sale. Further, the proceeds received from the Offer for Sale will not form part of the net proceeds. 

The Company proposes to utilize the Fresh Issue towards funding the following objects:

1. Repayment/ prepayment, in full or part, of certain borrowings availed by the Company and its Subsidiaries on consolidated basis.
2. Investment in the wholly owned Subsidiary, IKIO Solutions Private Limited, for setting up a new facility at Noida, Uttar Pradesh.

3. General corporate purposes.

In addition, The Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges including enhancement of the Company’s visibility, brand image among the existing and potential customers and creation of a public market for the Equity Shares in India.

Is there any OFS in the IPO?

The IPO comprises both Fresh Issue  and Offer for Sale. The size of Fresh Issue is up to Rs. 350 crore whereas the OFS of up to 7,500,000 Equity Shares. The Promoter Hardeep Singh is selling up to 6,000,000 Equity Shares and Surmeet Kaur will also sell up to 1,500,000 Equity Shares.  

Financials of the company?  

As per the rested financial statements, in FY22, the gross revenue of the company has reported an increase of 38% to Rs. 220 crore as against Rs. 160 crore in the previous financial year. The expenses of the company have also increased 38% to Rs.  182 crore as against Rs. 132 crore in the previous financial year. In FY22, the Profit Before Tax of the company was 38 crore as against Rs. 27 crore in the previous financial year. The Profit After Tax of the company was Rs. 28 crore as against Rs. 20 crore in the previous financial year. 

 The total assets of the company has reported an increase of 52% to Rs. 112 crore as against Rs. 74 crore in the previous financial year. The total equity and liabilities of the company has also increased 52% to Rs. 112 crore as against Rs. 74 crore in the previous financial year. 

 The net cash used in operating activities of the company was Rs. 5 crore as against Rs.  0.049 crore in the previous financial year. The net cash used in investing activities was Rs. 4 crore compared to Rs. 3 crore in the previous financial year. The net cash generated from financial activities was Rs. 10 crore as against Rs. 3 crore cash used in the previous financial year. 

Risk in The IPO

Internal Risks

Since September 12, 2022 the Company owns 100% of the equity shareholding of its Subsidiaries. As the Company did not own 100% of the equity shareholding of the Subsidiaries during Fiscal 2022, Fiscal 2021 and Fiscal 2020, the Restated Financial Information does not include financial information for  Subsidiaries prior to their acquisitions by the Company. Accordingly, the Restated Financial Information, as of, and for the years ended, March 31, 2022, 2021 and 2020, are not comparable to any future financial results that the company may prepare. In addition, because of their nature, the Proforma Consolidated Financial Information addresses a hypothetical situation and, therefore, does not represent the factual results of operations or financial condition.

Dependent on a Limited Number of Customers 

The Company is dependent on, and derives a substantial portion of its revenue from,  certain customers, Signify Innovations India Limited, erstwhile Philips India, and over 85% of the revenue is derived from the top twenty customers. Cancellation by the top customers or delay or reduction in their orders could have a material adverse effect on the business, results of operations and financial condition.

Lack of Long-term Volume Purchase Commitments 

The Company does not receive firm and long-term volume purchase commitments from its customers. If the customers choose not to renew their supply contracts with the Company or continue to place orders with the Company, the business and results of operations will be adversely affected. The Company typically enters into a period purchase orders for a specific range of products with the customers which is valid for three years and renewed thereafter.

Dependent on R&D

The Company is dependent on the R&D activities for the future success. If the Company does not successfully develop new products in a timely and cost-effective manner, the business, results of operations and financial condition may be adversely affected. The R&D department focuses on product designing, die and mould designing, electronic circuit designing and prototype designing. The development and commercialisation of the products are complex, time-consuming, costly and involve a high degree of business risk. The Company may encounter unexpected delays in the development of new products and these new products may not perform as the Company expected.

Tough Competition 

The Company operates in a competitive environment and may not be able to effectively compete due to various factors not under its control, which could have a material adverse effect on the business, results of operations and financial condition. The market wherein the company operates is competitive, rapidly evolving and is characterized by frequent introductions of new piping products, lighting solutions, applications and technologies. Failure to compete successfully against current or future competitors could have a material adverse effect on the business, results of operations and financial condition.