Lava International IPO - 7 things to know about
Lava International Ltd, is one of the major mobile manufacturing outsourcing companies in India that is aggressively targeting the Make in India opportunity wherein high value products can be made in India. This is specifically for industries where India has a manufacturing competitive edge. Lava International is now planning a combination of a fresh issue and an offer for sale, so as to list and also raise fresh funds in the market.
1) The IPO offer for Lava International, as per details filed in the draft red herring prospectus (DRHP) with SEBI, comprises of a fresh issue component of Rs.500 crore and an offer for sale of shares of up to 43.73 million shares by the existing early investors of the company and its promoters.
The actual size of the issue is not yet known and that will only become clear once the price band is announced and the total value of the Lava International IPO is known. However, the reported estimates are that the combined IPO of the fresh offer and the offer for sale would be approximately worth Rs.1,500 crore.
2) Lava International Ltd will be issuing nearly 43.73 billion shares as part of the offer for sale in the issue. The overall offer for sale (OFS) will consist of the tendering of up to 12.54 million shares by Hari Om Rai, up to 3.14 million shares by Shailendra Nath Rai and up to 7.84 million shares each by Sunil Bhalla and Vishal Sehgal.
In addition, there will also be an offer tendering of 11.27 million shares by Unic Memory Technology and an offering of another 0.97 million shares by Tupperware Kitchenware Pvt Ltd. The overall tendering by all these promoters and early investors will add up to 43.73 million shares.
3) Let us now turn to the application of the Rs.500 crore that will be raised by way of fresh issue. This will expand the capital base of Lava, result in fresh fund infusion and will also be EPS dilutive. Out of the total proceeds of Rs.500 crore, a sum of Rs.100 crore will be used for marketing and brand building activities, in an industry where such investments hold the key.
In addition, Rs.150 crore will be used for funding inorganic acquisitions and mergers in niche areas. In addition, the company will use around Rs.150 crore for investment in material subsidiaries for funding its working capital requirements. Lava will use the balance for working capital and general expenses.
4) Lava is a leading end-to-end designer and manufacturer of mobile handset and mobile handset solutions based in India. It has operations in India and a number of other countries too. In terms of the depth and breadth of its product offerings, Lava International designs, manufactures, markets, distributes and services mobile handsets, tablets and other electronics accessories under its own LAVA and XOLO brands.
In addition, it also provides high value added post-sales services to customers. It also offers mobile handsets solutions to original equipment manufacturers (OEMs). These unique services range from sourcing, design, manufacturing, quality testing, embedding software and also encompass distribution.
5) Recently, Lava International has also signed a partnership license agreement with Lenovo, which was formerly the laptops and PC business of IBM. This gives Lava International the leeway to distribute mobile handsets manufactured by them under the Motorola brand in India and overseas. This is a multi-year contract encompassing the entire value chain from design to manufacturing and marketing.
6) For fiscal 2021 ended March, Lava International reported revenues from operations of Rs.5513, 4.73% higher on YoY basis. Net profit for the full year ended March 2021, was Rs.172.61 crore, a sharp growth of 60% YoY. In terms of its manufacturing facilities, Lava International has SMT based facility in Noida, which is one of the leading technology in mobile handset manufacturing.
Lava International employs 3,105 workers across its 4 SMT lines and 12 assembly lines. The total manufacturing capacity of the company stands at 42.52 million units on an annualized basis. It also offers value added customer facing support via its 705 service centres and 60 service wheels across India.
7) The IPO of Lava International Ltd will be lead managed by Axis Capital, BOB Capital Markets, DAM Capital Advisors (formerly IDFC Securities) and SBI Capital Markets. They will act as the book running lead managers or BRLMs to the issue.
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