Dixon Technologies Ltd - Information Note

Nikita Bhoota

06 Sep 2017

Untitled Document

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Hearing Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so.

This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contacts or commitment whatsoever.

Issue Opens: September 6, 2017
Issue Closes: September 8, 2017
Face Value: Rs 10
Price Band: Rs 1,760-1,766
Issue Size: Rs 600 cr (3.4 mn shares)
Bid Lot: 8 Equity shares         
Issue Type: 100% Book Building

% shareholding

Pre IPO

*Post IPO

Promoter

46.2

38.9

Public

53.8

61.1

Source: RHP, * calculated based on information from RHP (at upper band)

Company Background

Electronic manufacturing firm Dixon Technologies manufactures consumer durables, lighting, mobile phones and home appliances, which made up for 34%, 22%, 33% and 8% of FY17 revenue respectively. It also provides reverse logistics (2.6%) services including set top boxes and mobile repairs. Additionally, it is also a leading Original Design Manufacturer (ODM) of lighting products, LED TV and semi-automatic washing machines in India. ODM contributes 22% to total sales. Its key customers are Panasonic, Philips, Haier, Gionee, Surya Roshni, Reliance Retail, Intex Technologies, Mitashi and DishTV.

Objects of the Issue

The offer consists of Fresh Issue of ~0.34 mn Equity Shares (aggregating upto ~ Rs 60 cr) and Offer for Sale of up to ~ 3.05 mn Equity Shares. The proceeds of the Fresh Issue will be utilized in setting up a unit for manufacturing of LED TVs at Tirupati Facility (Rs 60 cr), repayment or prepayment of debt (Rs 22 cr) enhancing backward integration capabilities in lighting products (Rs 8.9 cr) and for other general corporate purposes.

Key Points

The company targets to increase its share of ODM sales as it controls entire manufacturing cycle of a product; thereby leading to higher margins as compared to OEM segment.

Dixon is setting up a unit for manufacturing of LED TVs at Tirupati. Also, manufacturing of CCTVs and DVRs (through a joint venture) will be carried out at this facility. The company also plans to export its products to South East Asia market.

Dixon has low working capital cycle, stable operating cash flows and high returns.

Valuation

On post issue basis, the company is valued at 39.7xFY17 EPS (calculation based on upper band price and reported net profit considering post issue O/S shares). There are no listed entities similar to its business offerings.

*For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only.

Disclaimer: https://www.5paisa.com/research/disclaimer

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Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

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Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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Dixon Technologies Ltd - Information Note

Nikita Bhoota

06 Sep 2017

Untitled Document

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Hearing Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so.

This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contacts or commitment whatsoever.

Issue Opens: September 6, 2017
Issue Closes: September 8, 2017
Face Value: Rs 10
Price Band: Rs 1,760-1,766
Issue Size: Rs 600 cr (3.4 mn shares)
Bid Lot: 8 Equity shares         
Issue Type: 100% Book Building

% shareholding

Pre IPO

*Post IPO

Promoter

46.2

38.9

Public

53.8

61.1

Source: RHP, * calculated based on information from RHP (at upper band)

Company Background

Electronic manufacturing firm Dixon Technologies manufactures consumer durables, lighting, mobile phones and home appliances, which made up for 34%, 22%, 33% and 8% of FY17 revenue respectively. It also provides reverse logistics (2.6%) services including set top boxes and mobile repairs. Additionally, it is also a leading Original Design Manufacturer (ODM) of lighting products, LED TV and semi-automatic washing machines in India. ODM contributes 22% to total sales. Its key customers are Panasonic, Philips, Haier, Gionee, Surya Roshni, Reliance Retail, Intex Technologies, Mitashi and DishTV.

Objects of the Issue

The offer consists of Fresh Issue of ~0.34 mn Equity Shares (aggregating upto ~ Rs 60 cr) and Offer for Sale of up to ~ 3.05 mn Equity Shares. The proceeds of the Fresh Issue will be utilized in setting up a unit for manufacturing of LED TVs at Tirupati Facility (Rs 60 cr), repayment or prepayment of debt (Rs 22 cr) enhancing backward integration capabilities in lighting products (Rs 8.9 cr) and for other general corporate purposes.

Key Points

The company targets to increase its share of ODM sales as it controls entire manufacturing cycle of a product; thereby leading to higher margins as compared to OEM segment.

Dixon is setting up a unit for manufacturing of LED TVs at Tirupati. Also, manufacturing of CCTVs and DVRs (through a joint venture) will be carried out at this facility. The company also plans to export its products to South East Asia market.

Dixon has low working capital cycle, stable operating cash flows and high returns.

Valuation

On post issue basis, the company is valued at 39.7xFY17 EPS (calculation based on upper band price and reported net profit considering post issue O/S shares). There are no listed entities similar to its business offerings.

*For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only.

Disclaimer: https://www.5paisa.com/research/disclaimer

Have Referral Code?