Elin Electronics Ltd : SUBSCRIBE

Elin Electronics Ltd : SUBSCRIBE
  • Date

    20 Dec 2022 - 22 Dec 2022

  • Price Range

    ₹234 - ₹247

  • Minimum Order Quantity


  • (D) RHP


Incorporated in the year 1991, Global Surfaces Ltd. (GSL) is involved in the business of mining, producing, and exporting natural stones and engineered quartz. The company’s product offering includes slabs and countertops that can be used for various purposes like flooring, indoor wall cladding, vanity tops, reception desk, table tops, staircases, and more. Presently, the company has two manufacturing units in Rajasthan, with Unit I exclusively dedicated to processing natural stones such as marble, granite, and quartzite and Unit II for manufacturing engineered quartz. The company is an export-driven business (derived ~99% of revenue through exports for FY20, FY21, and FY22) and sells products in countries like the United States of America, Canada, Australia, and the Middle East.
Objects of the issue:
The IPO proceeds of the fresh issue will be used towards the following purposes:
  • Repayment/ prepayment, in full or part, of certain borrowings availed by the Company
  • Funding capital expenditure towards upgrading and expanding its existing facilities
  • General corporate purposes
Investment Rationale:

Established market position in key verticals, including leadership in the fractional horsepower motors segment, bodes well for future

The Company’s robust R&D setup helps in the design, manufacturing, and selling of a range of fractional horsepower motors including universal motors, exhaust fan motors, cooler motors, table fan motors, synchronous motors, sub pump, and fan blower motors. Elin has substantial backward integration in the manufacturing of fractional horsepower motors which includes press machines and moulding machines to manufacture sheet metal and plastics parts which are used in fractional horse power motors. It continues to enhance the production of fractional horsepower motors through the purchase of machinery and equipment. In addition, it continues to focus on increasing the production of metal parts, moulded parts, tools, and cartridge assembly, which will result in enhanced backward
integration and increased productivity across all product verticals. In June 2022, the Company received approval under the Production Linked Incentive (“PLI”) Scheme for White Goods (Air Conditioners and LEDs) for manufacturing of specified eligible products in the LED (components) target segment, with a committed investment of Rs. 100 million. Rising disposable income, electrification across India, and decreasing prices due to increasing competition is expected to boost the demand for household appliances. Moreover, government initiatives such as power for all and housing for all programs such as Pradhan Mantri Awas Yojana are key growth drivers for the demand for fractional horsepower motors in India. We believe that the Company’s deep market penetration, expansion plans for manufacturing facilities as well as backward integration will enable it to be well-positioned to capture the growing demand.

A high degree of backward integration has resulted in greater efficiencies, enhanced quality of products, and customer retention

Elin Electronics has always placed a strong focus on expanding its technological expertise in manufacturing its products and integrating its services.This has enabled the Company to increase its efficiencies and become an ideal partner for its customers, thereby maintaining an edge over other competitors. They have set up in-house manufacturing for die and mould, sheet metal components, plastic moulded components, aluminium dies casting, and surface coating. Moreover, they have machineries that produce best-in-class tools and dies which in turn support best-quality components and subassemblies. As on October 31, 2022, their setup included 157 moulding machines and 104 power presses which helped to bring efficiencies and economies of scale. It is to be noted that the Company has an in-house PCB assembly on surface mount technology (SMT) which is a critical part of its manufacturing process and prowess. The Company’s backward integration provides the benefit of greater control over the manufacturing process, quality, and the corresponding benefits of cost efficiencies, thereby improving their margins. Elin’s backward integration also enables them to have less dependency on third parties, gain control over the quality of components required for manufacturing, have an upper edge in designing products, improve operational and functional efficiencies and gain strategic advantages over competitors. Thus, they can fulfill customers’ requirements on time and enhance their ability to offer cost-competitive ‘one-stop-shop’ solutions.

Valuation and Outlook:
The global electronics manufacturing services market is traditionally comprised of companies that manufacture electronic products, predominantly assembling components on Printed Circuit Boards (PCBs) and box builds for major brands. Currently, brands are witnessing more value from EMS companies, leading to their involvement beyond just manufacturing services to product design and development, testing, and aftersales services, such as repair, remanufacturing, marketing, and product lifecycle management. The total addressable EMS market in India was valued at Rs. 2,654 billion (USD 36 billion) in FY2021 and is expected to grow to Rs. 9,963 billion (USD 135 billion) in FY2026, registering a CAGR of 30.3% over the period. However, the contribution of Indian EMS companies is around 40%, which is valued at Rs. 1,069 billion (USD 14 billion) in FY2021, which is expected to grow at a 41.1% CAGR to reach Rs. 5,978 billion (USD 81 billion) by FY2026. In Fiscals 2020, 2021, and 2022 and seven months ended October 31, 2022, Elin catered to 327, 387, 342, and 297 customers, respectively. The Company intends to increase cross-selling of its products to increase its customer base in various product verticals and expand into new or adjacent product verticals with its existing customers. By developing products with existing customers and offering a broad range of products across segments, the Company has increased customer dependence and positioned itself as a preferred supplier to its customers across segments. On the upper end of the price band, the issue is valued at a P/E of 25.8x based on FY2022 earnings which we feel is fairly priced compared to its peers, although its peers are bigger in terms of operations. We, therefore, recommend a “SUBSCRIBE” rating for the issue