IPO: Exicom Tele-Systems

Exicom Tele-Systems, a power management solution provider, will launch its IPO (initial public offering) on February 27, 2024. Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality: Its three-year average ROE and ROCE are 11 per cent each. It also reported positive cash flow from operations each year except in FY21. Growth: The company's revenue and profit after tax grew by 17 and 56 per cent annually, respectively, between FY21 and FY23. Valuation: The stock is valued at a P/E and P/B of 26.3 and 2.7 times, respectively. Overview: The rising trend of sustainable energy combined with the increased adoption of electric-based new energy solutions, especially in the telecommunication and automobile industry, should drive growth. However, opportunities in the sunrise industry will attract much competition from both organised and unorganised players, which, combined with high capital requirements, may pose a threat going forward. About Exicom Tele-Systems Founded in 1994, Exicom Tele-Systems is a power management solution provider. It operates under two main segments: Critical power segment: It provides energy storage solutions to telecommunication sites such as cell towers and other enterprise usages like in-house energy storage for data centres. This segment contributed 69 per cent of revenue as of TTM September 2023. EV (electric vehicle) charger segment: It provides electric vehicle supply equipment solutions, like offering charging systems for residential, business, and public purposes. In simple terms, it provides infrastructure for EV charging. This segment contributed 31 per cent of revenue as of TTM September 2023. Strengths of Exicom Tele-Systems Being an early entrant, the company has a 60 per cent and 25 per cent market share in residential and public charging segments, respectively. Vertically integrated operations supported by two R&D (research & development) facilities and three in-house manufacturing facilities help it provide end-to-end product development in their B2B category. Weaknesses of Exicom Tele-Systems Highly competitive industry: It faces stiff competition from many listed and unlisted players in the battery management industry. Its critical power segment, which accounted for 67.1 per cent of revenue from operation as of FY23, holds just 16 per cent market share in the DC (direct current) power systems market. Client concentration: Its top five customers accounted for more than 50 per cent of revenue from operations in the six-month period ending September 2023. Supply concentration: The company relies heavily on a few local and global suppliers for its raw materials. China alone contributes to more than 50 per cent of total raw material expenses. IPO details Total IPO size (Rs cr) 429 Offer for sale (Rs cr) 100 Fresh issue (Rs cr) 329 Price band (Rs) 135-142 Subscription dates Feb 27 - 29, 2024 Purpose of issue Capex, working capital requirement, repayment of debt, and offer for sale (OFS) Post IPO M-cap (Rs cr) 1716 Net worth (Rs cr) 640 Promoter holding (%) 69.6 Price/ear