EPACK Durable Limited IPO – Get Date, Price, Review and Details

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In this article, we will discuss

• Introduction
• The objective of the fresh issue
• Key Strengths and Opportunities
• Risks
• Financial Snapshot
• Conclusion

Introduction

EPACK Durable Ltd. (EDL) is the second largest room air conditioner original design manufacturer (“ODM”) in India in terms of number of units manufactured in Fiscal 2023 through the ODM route. It is a customer-centric business driven by a focus on continuing innovation and operational efficiency. It also identified the opportunity to increase value addition in its offerings to customers, and accordingly, started manufacturing various components such as sheet metal, injection moulded, cross-flow fans, and PCBA components which are actively used in the manufacturing of RACs. The company capitalized on its existing manufacturing infrastructure to strategically expand operations in the small domestic appliances (“SDA”) market, particularly considering the seasonality of the demand for RACs. This evidences its continued focus on the backward integration of operations and diversification of revenue streams.

The company’s product portfolio currently comprises designing and manufacturing room air conditioners, small domestic appliances which include induction cooktops, mixer-grinders, and water dispensers, and other components such as heat exchangers, cross flow fans, axial fans, sheet metal press parts, injection moulded components, copper fabricated products, PCBAs, universal motors, and induction coils for captive consumption as well as part of its product offerings to customers. EPack Durable’s customer list for RACs includes Blue Star Limited, Daikin Air-conditioning India Private Limited, Carrier Midea India Private Limited, Voltas Limited, Havells India Limited, Haier Appliances (India) Private Limited, Infiniti Retail Limited, Godrej and Boyce Manufacturing Company Limited, among others.

The objective of the fresh issue:

The company intends to utilize the net proceeds from the fresh issue towards funding the following objects:

• Funding capital expenditure for the expansion/setting up of manufacturing facilities;
• Repayment and/or prepayment of certain outstanding loans of the company;
• General corporate purposes.

Key Strengths and Opportunities:

• The company has established long-standing relationships with several well-known Indian and global customers. Some of its customers list for RAC products include Blue Star Limited, Daikin Air-conditioning India Private Limited, Carrier Midea India Private Limited, Voltas Limited, Havells India Limited, Haier Appliances (India) Private Limited, Infiniti Retail Limited, and Godrej and Boyce Manufacturing Company Limited. The average length of the company’s relationship with these customers is 8.7 years.
• The Indian RAC industry has grown at a rate of 11.2% in value terms, despite the disruption due to the COVID-19 pandemic which impacted two consecutive seasons for the industry. The Indian RAC industry is forecasted to grow at a rate of 15.1% by value from Fiscal 2023 till Fiscal 2028. In a bid to promote domestic manufacturing. The Indian government has banned the import of completely built units of air-conditioners with refrigerants from Fiscal 2021. Considering the potential of the Indian SDA industry, EPack Durable capitalized on its existing manufacturing infrastructure to strategically expand its operations in the SDA market and currently designs and manufactures induction cooktops, mixer grinders, and water dispensers.
• The evolution of the product portfolio and its ability to provide customized manufacturing solutions to its customers have been driven by product development and design capabilities. The company has dedicated R&D centers in Greater Noida, Uttar Pradesh, Bhiwadi, Rajasthan, Dehradun, and Uttarakhand, which are equipped with modern infrastructure. The R&D efforts are focused on the development of new products and improvement of the quality of existing products; improving design and engineering capabilities, manufacturing processes, and quality control processes.

Risks:

• A significant portion of EPack Durable’s revenue is generated from certain key customers. Any loss of one or more such customers, or deterioration of their financial condition or prospects, or a reduction in their demand for this company’s products could adversely affect EPack’s business, results of operations, financial condition, and cash flows.
• The company’s business is dependent on three manufacturing facilities and is subject to certain risks in its manufacturing process. Any slowdown or shutdown in the manufacturing operations could harm the business, financial condition, and results of operations.
• If EPack is unable to introduce new products and respond to changing customer requirements, including due to changing customer preferences and regulatory requirements in a timely and effective manner, the demand for its products may decline, which may have an adverse effect on the business operations of the company.

Financial Snapshot:

Conclusion:

EPack Durable Limited comes at an earnings valuation of 50x based on its EPS as of March 31, 2023, and the upper price band. In comparison to its listed peers Amber Enterprises India, Dixon Technologies (India), PG Electroplast, and Elin Electronics, the valuation of EPack appears to be relatively cheaper. During H1FY24, in line with general trends for the segment, the company encountered a setback in its top and bottom lines. However, it is optimistic about a recovery attributed to a new plant that will augment the capacity. Considering the company’s market position, clientele, and growth prospects .

We advise the investors to consider subscribing to this IPO for long-term perspective.