Aimtron Electronics
- Aimtron Electronics is coming out with initial public offering (IPO) of 54,04,800 shares of Rs 10 each in a price band Rs 153-161 per equity share.
- The issue will open for subscription on May 30, 2024 and will close on June 03, 2024.
- The shares will be listed on NSE Emerge Platform.
- The face value of the share is Rs 10 and is priced 15.30 times of its face value on the lower side and 16.10 times on the higher side.
- Book running lead manager to the issue is Hem Securities.
- Compliance Officer for the issue is Priyanka Shah.
Profile of the company
The company is engaged in the business of providing products and solutions towards electronics system design and manufacturing (ESDM) services with a focus on high value precision engineering products. It provides product and solutions right from printed circuit board (PCB) design and assembly to the manufacturing of complete electronic systems (Box Build), to certain domestic and global manufacturers located in India, United States of America, Hongkong, United Kingdom, Spain, Mexico.
The company offers tailored solutions for customers’ needs, encompassing automated micro-electronics assembly and precision component integration. Its solutions involve its client providing the design for the product for which it provides manufacturing services or in some cases require it to design the relevant product based on the specifications provided by the client including manufacturing of the product. Its solutions primarily comprise of: (i) printed circuit board assembly (PCBA), (ii) any box build assemblies in addition to finding its application in battery management systems used in electrical vehicles (iii) design solutions offering end to end services right from conceptualizing the design, engineering, product prototype development, manufacturing of turnkey requirements for its customers. Through its end-to-end capabilities, its customers may achieve tangible benefits such as reduced manufacturing costs, improved supply chain management and reduced inventory obsolescence.
The company started in 2011 as a pure play PCB designer and assembler and over the years has invested in its capabilities and become one stop ESDM solution provider. Each of its diversified capabilities stands alone on its own merit, providing customers with a number of options while also enabling its growth in each of these areas. The company offers a broad range of products and services across multiple industry segments. These ESDM products and services are essential for industrial automation, electric vehicle mobility, IoT and embedded systems, medtech and wearables, gaming, robotics etc. They provide higher-level monitoring and control various functions of machines to define, organize, and meet production objectives. The end-use industries that it caters to include: Industrial sector, Medical & Healthcare Equipment, Automobiles, Power, Gaming, Drones and UAV (unmanned aerial vehicle) etc.
The company operates through its two manufacturing facilities, one situated in Vadodara, Gujarat and the other situated in Bengaluru, Karnataka. Its manufacturing facilities include engineered layout with process controls and necessary automations for quality and productivity. This allows it to keep its core competencies within the company, allowing it to ensure strict quality control and safety at each step of its manufacturing process.
Proceed is being used for:
- Repayment in full or in part, of certain of the company’s outstanding borrowings.
- Funding Capital Expenditure towards installation of additional plant and machinery.
- Funding to meet working capital requirements.
- General Corporate Purpose.
Industry overview
India, today, is a major player in the global electronics manufacturing industry. The country is rapidly becoming an electronics manufacturing hub, with the sector expected to rise to $300 billion by 2025-26. This growth can be attributed to the government's push to promote domestic electronics manufacturing, which has led to increased investment and the creation of new jobs. From $9.8 billion in 2021, India’s domestic demand for consumer electronics is seeing significant growth and is expected to touch $21.18 billion by 2025. India is also home to the world's second-largest smartphone market, with over 1.3 billion mobile phone users in the country. This presents a huge opportunity for companies and investors looking to tap into the manufacturing of smartphones and other electronic devices. One of the key initiatives driving India's push towards electronics manufacturing is the Production-Linked Incentive (PLI) scheme. The PLI scheme is aimed at promoting domestic manufacturing and export of electronic products, and offers companies incentives on incremental sales from products manufactured in India, over the base year. The country’s large-scale electronic manufacturing (LSEM) sector received the maximum allocation of Rs 40,951 crore (approximately $5 billion) under this scheme. This has led to a surge in investments in the sector, with several global electronics companies, including Samsung and Apple, setting up manufacturing facilities in India. The global giant Apple became the first smartphone player in India to have exported $1 billion worth iPhones in a single month of December 2022.
The success of India's electronics manufacturing industry can be seen in the country's growing exports. Electronics is India's fastest-growing export sector, with smartphones being the top export item. In fact, India surpassed a remarkable $10 billion worth smartphone exports in FY 2022-2023. This is a testament to the country's ability to compete with other major electronics manufacturing hubs such as China and South Korea. 97% of the smartphones sold in the country are produced domestically, while exports have increased by over 139% over the last three years. The recent announcement for the setting up of the Electronics Manufacturing Cluster (EMC) at Dharwad, Karnataka worth Rs 180 crore (approximately $21.98 million) is a step towards Atmanirbhar Bharat, and is expected to create over 18,000 jobs. Key government initiatives aimed at boosting domestic production of electronics and IT hardware include the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which offers financial incentives for the production of electronic components and semiconductors. The Modified Electronics Manufacturing Clusters (EMC 2.0) initiative seeks to establish world-class infrastructure for electronics manufacturing.
Pros and strengths
‘One Stop Shop’ for electronics system design and manufacturing services: With a focus on the company’s customers’ needs, it offers well diversified solutions comprising PCB design and assembly, box build assemblies and design solutions offering end to end services right from designing to mass manufacturing. Its integrated services include its focus on assembly of cable and wire harnesses, electro-mechanical components, sheet metal fabrication, sheet metal machining and plastic injection moulding. Further, it focuses on continually expanding its technological expertise in manufacturing for diverse industries, integrating its services, and thereby enhancing its capability to serve multiple industry verticals. Its capability to manufacture and supply quality products ensures customer satisfaction, fosters customer loyalty and generates repeat business. Additionally, the continuous learning from its diversified experience enhances the knowledge level of its workforce, makes it capable of delivering solutions and creates talent. The diversification and expansion of its product portfolio is primarily driven by the needs of its customers and technological advancements in the industry.
Engineering expertise with complex product manufacturing capabilities: The company operates from its two manufacturing facilities, one situated in Vadodara, Gujarat and the other situated in Bengaluru, Karnataka. It has comprehensive in-house capabilities of designing and manufacturing capabilities. Its facilities support manufacturing of micro-electronic components to gigantic box build assemblies. The company manufactures and assembles a wide range of critical assemblies and precision components with close tolerances through its precision machining, assembly, and fabrication facilities for onward usage by its customers in the relevant industry. Its manufacturing facilities are equipped with machines like: Fully Automated Screen Printer, Automated 3D SPI, Automated selective soldering machine, Automated conformal coating machine, Pick and Place Machine, Reflow –N2 ready, Automated 3D AOI, X-Ray machines, etc. Its manufacturing facilities comprises of 4 Surface Mount Technology (SMT) lines, 37 Through (Soldering) Hole setup station (THT) lines and 2 box build assembly lines. Each of its facilities is accredited with quality standards and certifications.
Long term and well-established relationships with customers: The company has long term relationships with component manufacturers across its various product categories. With its track record and wide product portfolio, it has been able to retain its existing customers and also been able to attract new customers. It collaborates with its customers through the entire product life-cycle including assisting with concept creation, product development, prototyping, testing and mass manufacturing. This results in customers shortening their product development and time-to market cycles. It is well positioned to increase the number of different products that it manufactures for them, increase the volume of its shipments to them of each particular product and expand its coverage to other areas where they require similar solutions. Its customers span multiple sectors, ranging Industrial sector, Medical & Healthcare equipment, Automobiles, Power, Gaming, Drones and UAV (unmanned aerial vehicles) etc.
Risks and concerns
Dependent on sale of products and services to certain key customers: The company’s customer base currently comprises a host of international and domestic companies. It is dependent on certain key customers for sale of its product. Its largest customer, being its Group Company, Aimtron Corporation, USA contributed to approximately 51.74%, 55.99%, 49.42% and 7.78% of its revenue from operations. The loss of these customers or a loss of revenue from sales to these customers may materially affect its business, financial condition, results of operations and cash flows. As a result, the volume of sales to its customers may vary due to changes in its customers’ sourcing strategies. It cannot assure that it will be able to significantly reduce customer concentration in the future. Most of its business comprises of sales directly to its group companies, for which it does not have long term agreements. It sells such products to its foreign group company for the orders procured by them and if such group companies opt other suppliers for fulfilling their demands, it may not be able to find alternate customers. Further it may be unable to establish that sales to these foreign group companies have been made at arms length pricing which may expose it to statutory liabilities.
Operate in highly competitive markets: The company operates in the ESDM industry, which is highly competitive. The industry is highly fragmented as there is competition from various domestic and international players. It faces competition from both organised and unorganised players in the industry. It faces competition from some of the listed peers like: Kaynes Technology India Limited, Syrma SGS Technology Limited, Avalon Technologies, Vinyas innovative technologies limited etc. The growth trajectory in the industry has encouraged new entrants to enter into this industry with new business models. In such highly competitive environment, to gain more market share the players are likely to reduce the pricing which is a challenge for the existing players. It competes in various aspects, including user experience, breadth of product and service offerings, product complexity, functionality and quality, sales and distribution, supply chain management, among others. Intensified competition may result in pricing pressures and reduced profitability and may impede its ability to achieve sustainable growth in its revenues or cause it to lose market share.
Subject to strict quality requirements, customer inspections and audits: The company develops and manufactures complex and specialised components for its diversified range of products and services catering to various sectors based on specific requirements stipulated by its customers. Given the nature of its products and services and the sector in which it operates, its customers have high standards for product quality and delivery schedules. Adherence to quality standards is a critical factor as a defect in products manufactured by the company or failure to comply with the specifications of its customers may, in turn, lead to the manufacture of faulty end-products. Component failures, manufacturing non-conformance, unknown safety, efficacy concerns, design defects, off-label use, or inadequate disclosure of product-related risks or product-related information with respect to its products, if they were to occur, could result in directly or indirectly, personal injuries or other adverse effects. This may lead to cancellation of supply orders and at certain instances may impose additional costs in the form of product liability and/or product recall. Further its facilities, process and products are exposed to regular inspection and audits by its customers to ensure that their internal standards are appropriately met.
Outlook
Aimtron Electricals provides products and solutions for electronics system design and manufacturing (ESDM) services, with a focus on high-value precision engineering products. The company offers PCB design, assembly, and complete electronic system manufacturing for domestic and global manufacturers in India, the USA, Hong Kong, the UK, Spain, and Mexico. The company's solutions primarily consist of: (i) printed circuit board assembly (PCBA), (ii) any box build assemblies in addition to finding their application in battery management systems used in electrical vehicles (iii) design solutions offering end-to-end services right from conceptualizing the design, engineering, product prototype development, and manufacturing of turnkey requirements for its customers. The company has two manufacturing facilities. One is in Vadodara, Gujarat, and the other is in Bengaluru, Karnataka. Its manufacturing capabilities have enabled it to address its consumers’ diverse needs, enhance existing products with emerging technologies, development of new products and optimize costs across its products through value analysis and value engineering. On the concern side, the company has historically derived a significant portion of its revenues from operations from export to countries like: United States of America, Hong kong, United Kingdom, Spain, Mexico etc. Therefore, any developments in the global ESDM industry or the industries in which its customers operate could have an impact on its sales from exports. Besides, the company is subject to the risk of increases in freight costs. If it cannot fully offset any increases in freight costs, through increases in the prices for its products, it would experience lower margins.
The company is coming out with an IPO of 54,04,800 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 153-161 per equity share. The aggregate size of the offer is around Rs 82.69 crore to Rs 87.02 crore based on lower and upper price band respectively. On performance front, total income for the financial year 2022-23 stood at Rs 7239.98 lakh whereas in Financial Year 2021-22 the same stood at Rs 2689.41 lakh representing an increase of 169.20%. The company has reported net profit of Rs 863.19 lakh in financial year 2022-23 as compared to net loss of Rs 180.15 lakh in financial year 2021-22. Meanwhile, the company intends to continue enhancing its operational efficiencies, to increase economies of scale, better absorb its fixed costs, reduce its other operating costs and strengthen its competitive position. It would focus on improving capacity utilization at its production facilities, through increase in its overall production volumes. It will continue to seek to manage its supply chain costs through optimal inventory management, economic orders and other measures. Economies of scale will also enable it to continuously improve its operational efficiencies.
