Kaynes Ltd IPO for medium to long-term gains

Kaynes Technology India Limited is tapping the capital markets with its issue, which opened on November 10 and would close on Monday (Nov 14). The issue consists of a fresh issue of Rs530 crore and an offer for sale of 55.84 lakh shares in a price band of Rs559-587. The company had earlier completed an allocation of 43,76,421 shares to 28 anchor investors. The highest allocation was made to Volrado Venture Partners Fund who was allotted 11.68 per cent of the anchor book. The next allocation was made equally to ten entities who were allotted 5.45 per cent of the anchor book. This included both FPIs and domestic funds. A total of 40.35 per cent of the anchor book was given to 14 domestic mutual funds while 59.65 per cent was given to 14 FPIs.

The company Kaynes is an end-to-end and IoT solutions enabled electronics manufacturing player, having capabilities across the entire spectrum of electronics system design and manufacturing (ESDM) services. The company has experience in providing conceptual design, process engineering, integrated manufacturing and life-cycle support for major players in the automotive, industrial, aerospace and defence, outer-space, nuclear, medical, railways, Internet of Things (IOT), Information Technology (IT) and other segments.

The company is located at Mysore in Karnataka and was set up by Ramesh Kunhikannan. He owns 79.78 per cent of the pre-IPO capital of the company.

The business that the company is into needs certifications at every stage. The company has ten global certifications and has a long standing with its key customers. They are of 5-8 plus years of relationship with the first couple of customers going back to the time when the company began its operations. It has an order book of Rs 2,200 crore to be executed over the next 18 months. This implies that the revenues which were at Rs 710 crore for the year ended March 2022 would double to Rs 1,400 crore or thereabouts, if the order book is to be completed in 18 months. This doubling would happen with the capacities available with the company.

The company has also received approval under the PLI (production linked incentive) scheme and is in the process of setting up the new facility under the same scheme. This would help the company in achieving a substantial jump over its existing revenues, as the new capacity under the PLI scheme has a high asset turnover ratio.

The company has been consciously seeking orders where there is more of value add and use of embedded systems, IOT solutions and designs skill enhancements. This enables getting closer to the buyer and having the order on a recurring basis as there is greater skill sets involved. The company is into a wide array of sectors and products which ensure that cyclicality in one sector or slowdown does not affect the company. It makes a wide array of products using various applications which look simple at first shot but are complex. Many of these products are large and voluminous in nature and have the highest level of accuracy as a starting point.

The company reported revenues of Rs 710 crore for the year ended March 2022 and a profit after tax of Rs 41.67 crore. The revenues for the first quarter ended June 2022 have risen to Rs 199.97 crore with the profit after tax at Rs 10.04 crore. The EPS for the year ended March 2022 is Rs 9.70 basic and fully diluted at Rs 8.93. For the first quarter June 2022, the EPS is Rs 2.11 on a fully diluted basis. The PE band of the issue is 62.60 – 65.73.

The company has compared itself with Syrma SGS, Dixon Technologies and Amber Enterprises. It compares favourably with the peer set. Revenues are lower than the peer set but looking at the order book, capex done and planned, gives comfort about the future. The stock offers appreciation in the medium to long-term considering that it involves technology and has entry barriers in terms of accreditation and multiple relationships.

(The author is the founder of

Kejriwal Research and Investment Services, an advisory firm)