Exicom Tele-Systems Limited IPO – Get Date, Price, Review and Details

In this article, we will discuss:

• Introduction
• Objects of the Offer
• Key Strengths
• Risks
• Financial Snapshot

Introduction

Exicom Tele-Systems Limited is a global partner in power management solutions. The company was incorporated in 1994 and is headquartered in India. It operates under two distinct business verticals.

In the Critical Power Solutions Business, it specializes in designing, manufacturing, and servicing DC Power Systems and Li-ion based energy storage solutions for telecommunications sites and enterprise environments worldwide.

In the Electric Vehicle Supply Equipment (EV Charger) Solutions Business, it pioneers smart charging systems for residential, business, and public use.

Under the Critical Power Business, its products are categorized under indoor power systems, outdoor power systems, hybrid power systems and Li-ion Batteries.

And under EV Charger Business, products are categorized under AC chargers and DC fast chargers. Its services include installation, maintenance, spare parts supply, and repair.

Promoters of the company are NextWave Communications Private Limited and Anant Nahata.

By September 30, 2023, the company has installed more than 61,000 EV chargers across 400 locations in India and has deployed 470,810 Li-ion Batteries for application in the telecommunications sector, equivalent to a storage capacity of over 2.10 GW. As of September 30, 2023, the company employs 1,190 employees in India. The company also has 50 employees at its subsidiaries.

Objects of the Offer:

The company intends to utilize the net proceeds towards the following objects:

• Part-financing the cost towards setting up of production/assembly lines at the planned manufacturing facility in Telangana;
• Repayment/pre-payment, in part or full of certain borrowings of the Company;
• Part-funding incremental working capital requirements;
• Investment in R&D and product development; and
• General corporate purposes.

Key Strengths:

• Early-mover advantage in the Indian EV Charger market: It is amongst the first entrants in the EV Chargers manufacturing segment in India. EV charger market is fast growing industry, characterised by high entry barriers which gives an advantage to the company over potential threat of new entrants. EV, and thereby EV Charger business, has huge potential to grow in the coming decades given the growing environmental concerns.
• Rapid growth in EV Charger Business: As of March 31, 2023, it had a market share of 60% and 25% in the residential and public charging segments. Company’s EV Charger Business’ turnover has witnessed a 61% y-o-y surge in FY 2022 and 215% y-o-y surge in FY 2023. Also, in the Q2 of FY 2024 EV Charger Business’ sales has increased by 91.67% Q-o-Q.
• Vertically integrated operations and significant research and development activities: The company has robust supply chain with end-to-end product development capabilities from concept to design to engineering to prototype testing. The company has in-house R&D capability enabling it to bring product innovation, coupled with vertically integrated operations enabling it to exercise a degree of control over manufacturing costs.
• Long-standing relationships with an established customer base: The company has successfully retained its top five customer over the years, who continues to contribute more than half of its Critical Power Business’ revenue. It focuses on collaborating and upgrading products in tandem with its key customers, in accordance with their evolving specifications and requirement.

Risks:

• Losses in past and cyclicality of Critical Power Business: The revenue from operation in Critical Power Business was ₹ 771.7 Cr in FY 2022 which dropped to ₹ 483.7 Cr in FY 2023 resulting in 37% y-o-y fall. This sales dip has led to fall in EBITDA and EBIT margins in FY 2023. Also, company has incurred a loss of ₹ 27.5 Cr in the H1 FY 2023, though it has recovered in the later half. Cashflows from operations were negative in the H1 FY 2023 and in FY 2021.
• EV Charger Business is dependent upon the adoption of, and demand for EV: Currently, the EV industry in India is at a nascent stage and characterized by rapidly changing technologies and increasing consumer choice. High price of the EV models and concerns of its performance over long distances have still kept some customers to avoid EV. Changing Government regulations, industry standards and consumer behaviour keep the industry in uncertainty.
• Substantial dependency on top five customers: The company is obtaining more than 50% of its revenue in Critical Power Business from top five customers, including GoI entities/PSU since last three years. So, that vertical’s revenue is concentrated in few sources, loss of any of these customers or a reduction in purchases by any of them could adversely affect the business. GoI awards contracts on a competitive basis which have the potential to create pricing pressure which in turn exerts pressure on margins.
• Operations are dependent on continued research and development process: EV industry being in the evolving stage experiences a constant upgradation with the technology. Inability to identify and understand, or keep up with evolving industry trends, technological advancements may affect the company’s business. This calls for refining and evolving products to adapt to changing industry trends, technological advancements, customer preferences and higher R&D cost, which may or may pay off.

Financial Snapshot:

*PAT indicates profit after tax from continuing operations

^RoE and RoCE are not annualised for six months periods ended September 30, 2023 and September 30, 2022