Exicom Tele-Systems Ltd IPO : SUBSCRIBE

Exicom Tele-Systems Ltd IPO : SUBSCRIBE
  • Date

    27th Feb 2024 - 29th Feb 2024

  • Price Range

    Rs. 135 to Rs. 142

  • Minimum Order Quantity

    100

Company Overview

Incorporated in 1994, Exicom Tele-Systems Limited (ETL) specializes in power systems, electric vehicle (EV) charging, and Li-ion based energy storage solutions. The company operates under two verticals in its core business. The first vertical of power systems specializes in providing uninterrupted power solutions (UPS) for digital communication networks, which are extremely power-intensive, yet mission-critical for most organizations. The second core business vertical of ETL is the EV Charging Solutions vertical. As of date, ETL has deployed more than 6,000 AC (alternate current) and DC (direct current) chargers in India and Southeast Asia. Their EV charging solutions are designed to be tough and resilient and have the capacity to withstand harsh environmental and electrical conditions. ETL is among the early entrants to enter India’s EV charger manufacturing segment. This is a business that has high visibility in terms of growth in the coming years as India moves towards green mobility. ETL offers slow charging solutions (primarily AC chargers for residential use) and fast charging solutions (DC chargers for business and public charging networks in cities and highways). Further, ETL provides its customers with a wide range of services covering installation and commissioning, maintenance and operations, supplying individual spare parts, and repair and return. It has a robust customer base, which includes established automotive OEMs (for passenger cars and EV buses), charge point operators (CPOs), and fleet aggregators, who are running green vehicles as part of their fleet service. It has already installed 61,000 EV chargers across 400 locations in India and has deployed a total of 470,810 Li-ion (lithium ion) batteries for application in the telecom sector, equivalent to storage capacity of over 2.10 GWH. It has over 70 core customers and employs 1,190 personnel on full-time and contract basis. As of FY23, ETL has an in-house manufacturing capacity of 1.3+ lakh rectifiers, 12k DC Power Systems, 44.4k EV chargers and 56.4k Li-ion battery across its three plants.

Industry

The increasing demand for mobile data and voice services, the growing adoption of 4G and 5G networks, and the need for reliable and uninterrupted power supply for telecommunication towers are the key factors driving the growth of the global telecommunication power market. The market size for telecommunication DC power systems (including hybrid systems) in India is estimated at Rs. ~15 bn for FY23, with upgradation and replacement demand expected to drive the industry with 75% demand while balance 25% demand is expected on account of new tower additions. The energy storage solutions market for telecommunications is valued at Rs. 19.5 bn in FY23, while the market size for Li-ion battery energy storage systems in data centers is valued at Rs. 3.2 bn in FY23.
The domestic EV PV market has grown substantially at a CAGR of 127% from FY19 to FY23 reaching a total of 47,512 electric cars. It is estimated to grow at a CAGR of 50-60% between FY24-28E, with 9-12% EV penetration expected in FY28. The current EV charging market in India is estimated at Rs ~8.5 bn as of FY23. The public charging station market which is estimated to contribute ~50% of the overall Electric Vehicle Supply Equipment (EVSE) market size in FY24 is expected to grow at a CAGR of 45-50% between FY24-28. The E-buses charging stations market is expected to grow at a faster CAGR of 80-85% owing to higher scope of penetration. The residential charging segment is expected to grow at a CAGR of 60-65%.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  1. Part-financing the cost towards setting up of production/assembly lines at the planned manufacturing facility in Telangana – Rs. 146 crores;
  2. Repayment/pre-payment, in part or full, of certain borrowings of the company – Rs. 50.3 crores;
  3. Part-funding incremental working capital requirements – Rs. 69 crores;
  4. Investment in R&D and product development – Rs. 40 crores;
  5. General corporate purposes.

Investment Rationale:

Early-mover advantage and industry tailwinds to propel growth

ETL stands out as an established player with a significant early-mover-and-learner advantage in the rapidly growing Indian EV charger market. As one of the first entrants in the segment in 2019, the company has capitalized on its early presence to secure a substantial market share, particularly in the residential (60% market share) and public charging (25% market share) segments. The market also has significant entry barriers that include evolving technology standards, stringent performance requirements, grid infrastructure compatibility, the necessity for strategic partnerships, and demanding service setups. The rise of electric vehicle (EV) penetration in passenger vehicles, commercial vehicles, and electric buses presents a compelling growth opportunity for ETL. With PV EVs projected to grow at a remarkable CAGR of 50-60% between FY2023-28 to reach 5.5 lakh cars by FY28, the demand for EV chargers is set to soar. The company is well-positioned to capitalize on this trend, given its early entry into the market and comprehensive portfolio of EV charging solutions. Moreover, ETL has planned the set-up of two production/assembly lines – a) Critical Power and EV Charger production/assembly line and; b) Prismatic production/assembly line for Li-ion Batteries at its planned manufacturing facility in Hyderabad. Upon commencing operations, the facility would provide ETL increased capacity for the production of EV chargers and will enable it to capitalize on growth in demand for EV chargers. Additionally, the EV charging infrastructure market in India is at a nascent stage, with significant growth potential driven by favourable government policies, lower cost of ownership, and investments in charging infrastructure. ETL’s early-mover advantage, vertically integrated operations, robust R&D capabilities, and diversified product portfolio positions it to capitalize on the burgeoning EV industry in India and globally. With a projected total addressable market of Rs. 9.0-9.5 bn by FY28, ETL is poised for sustained growth and market leadership in the EV charger segment.

Customer-centric approach and vertically integrated operations to drive success

ETL’s track record of long-standing relationships with an established customer base underscores its commitment to delivering customer-centric solutions and value-added products and services. With a diverse customer base spanning telecommunications companies like Jio Infocom Limited and Maxis Telecom (an operator in South East Asia), tower companies like American Tower Corp., Eastcastle Infrastructure DRC S.R.L.U. and Indus Tower, automotive OEMs and charging infrastructure providers, the company has built a reputation for reliability and excellence in the industry. Through collaborative partnerships and ongoing engagement with key customers, ETL continuously upgrades its products to meet evolving market demands and customer specifications. The company’s stringent quality standards, durability, and reliability of products are essential factors in maintaining customer relationships, particularly in critical applications where it has garnered a market share of 16%. With end-to-end product development capabilities and in-house R&D centers, the company intends to accelerate product innovation, shorten development cycles, and ensure consistent quality across its product portfolio. By providing a range of services, including installation, maintenance, spare parts support, and technical assistance, ETL strengthens its customer relationships and reinforces its commitment to delivering superior customer experiences.

Valuation and Outlook:

ETL’s track record of long-standing relationships with an established customer base underscores its commitment to delivering customer-centric solutions and value-added products and services. With a diverse customer base spanning telecommunications companies like Jio Infocom Limited and Maxis Telecom (an operator in South East Asia), tower companies like American Tower Corp., Eastcastle Infrastructure DRC S.R.L.U. and Indus Tower, automotive OEMs and charging infrastructure providers, the company has built a reputation for reliability and excellence in the industry. Through collaborative partnerships and ongoing engagement with key customers, ETL continuously upgrades its products to meet evolving market demands and customer specifications. The company’s stringent quality standards, durability, and reliability of products are essential factors in maintaining customer relationships, particularly in critical applications where it has garnered a market share of 16%. With end-to-end product development capabilities and in-house R&D centers, the company intends to accelerate product innovation, shorten development cycles, and ensure consistent quality across its product portfolio. By providing a range of services, including installation, maintenance, spare parts support, and technical assistance, ETL strengthens its customer relationships and reinforces its commitment to delivering superior customer experiences.