Exicom Tele-Systems Limited IPO Review

Exicom Tele-Systems Limited IPO Review: Exicom Tele-Systems is set to issue an IPO of Rs. 429 Cr will open on February 27, 2024. The issue will close on February 29 and be listed on the exchange on March 5, 2024. In this article, we take a look at Exicom Tele-Systems Limited IPO Review 2024 and its strengths and weaknesses. Read on to find out!

About Exicom Tele-Systems Limited

Exicom is a power management solutions provider founded in 1994. The company operates in two separate business segments: Its main business is Core power solution business. In this segment, the company designs, manufactures and services DC power systems and lithium-ion based energy storage solutions. We provide energy management solutions across telecommunication sites in India and overseas.

In the core power segment, it holds a market share of 16% in DC power systems and 10% in lithium-ion battery applications for the telecom market. Our business scope is India, Southeast Asia, and Africa. In FY19, Exicom entered the electric vehicle charger business. In this segment, Exocom manufactures EV chargers for residential and public charging stations, accounting for 60% and 25% market share respectively.

The company manufactures smart chargers that comply with global standards such as CE as well as domestic standards such as the Automotive Research Association of India (ARAI). As of September 2023, Exicom has deployed over 61,000 EV chargers across 400 locations in India.

Exicom’s customers include Reliance BP Mobility and Fortum Charge. Vehicle aggregators such as BluSmart Mobility and Lithium Urban Technologies. Mahindra & Mahindra, MG Motors, JBM Ltd. Establishment of OEM company, etc.

The company has three manufacturing facilities in Solan and Gurugram with a built-up area of ​​1.34 Lakh sq ft with a capacity to manufacture 12,000 DC power systems and 44,400 AC and DC chargers per annum.

Exicom has vertically integrated, end-to-end product management capabilities from concept to design engineering and prototype testing. We also have two dedicated research and development centers in Gurugram and Bangalore.

The R&D facility focuses on developing EV chargers, battery packs, and battery management software. In our core power solutions business, our R&D team strives to create innovative lithium-ion battery and DC power solutions that are cost-effective and maintain our technological edge.

Industry introduction

According to a CRISIL report, the telecom power system market in India is expected to grow at around Rs. 1500 Cr in FY23 to Rs. 2200 Cr FY28 growing at a CAGR of 8.50%. The market for energy storage solutions for telecom is expected to grow at Rs. FY23 1950 ~ Rs. 3,610 Cr in FY 2028, at a CAGR of 13.10%.

According to CRISIL, the proliferation of data centers has driven demand for associated infrastructure, including energy solutions such as lithium-ion batteries.

The market size of lithium-ion based battery energy storage solutions for data centers is estimated at around Rs. 320 Cr for FY23 and is expected to grow to Rs. 4700 Cr by FY28. Whether increasing amounts of data are exchanged over telecommunications networks or managed through central data centers in cloud locations, both enterprise solutions require critical power solutions to support the technology and data.

Driven by global interest in the energy transition, the world of transportation is moving towards electrification. According to CRISIL, the Indian EV industry is one of the fastest growing markets, growing 130% year-on-year in FY23. EV personal vehicles are expected to grow at a CAGR of 50% to 60% and EV penetration of 8% to 10% between FY23 and FY28. The EV bus market is expected to achieve a penetration of 14-16% and grow at a CAGR of 55-60% by FY 2028.

Supporting this market requires a significant increase in the capacity of EV charging networks, which represents a significant opportunity for the EV industry. The total market size for EV charging products in India is expected to be Rs. 900-950 Cr as of FY28.

Exicom Tele-Systems IPO Review – Financials

Exicom earned a profit of 10 billion won. 708 Cr in FY23, down 16% from Rs. 843 Cr in FY 2022. The decline in sales was due to sluggish sales in the core power business, and the electric vehicle charging business grew by 215%, mitigating the blow to sales.

Exicom’s operating revenue has grown at a CAGR of 17% since FY21. As of FY23, its critical power business generates 68% of its revenue, with the remaining 32% coming from the EV charging segment.

Despite a 16% decline in revenue in FY23, the company’s net income increased 2%, and net income from continuing operations has increased 56% since FY21. The company’s EBIT margin fell significantly from 6.2% in FY22 to 5.08% in FY23.

In the last three years, Exicom has recorded losses on discontinued operations in the amount of Rs. 24.6 Cr, Rs. 25.2 Cr and Rs. 26.2Cr each in FY23, FY22 and FY21. Taking these losses into account, Exicom’s annual profit would be Rs. 6.37 Cr, Rs. 5.1 Cr and Rs. 3.4Cr each.

In terms of order inflow, while core segment orders have declined by 16% since FY22-23, orders for the EV charger business have increased by 224%. As of September 2023, the order value has remained at Rs. 581Cr.

Exicom Tele-Systems – Key Players

Exicom has two companies listed as associates. servotech and HBL Power System. In terms of revenue, Exicom ranks among its peers, with revenue nearly six times that of Servotech and half that of HBL Power. In terms of return on equity, the Servo was found to be slightly higher than the Exicom system. It is important to note that ROE of 13.38% is Exicom’s return on equity from continuing operations, while 2.75% is its ROE from continuing and discontinued operations.

Since the business targets the electric vehicle industry, it offers high price-to-earnings ratios of 156x and 139x. If we calculate Exicom’s price to earnings ratio using the higher price band of Rs. If it is 142, continuing operating profit is 42 times. Both continuing and discontinued operating profits are 206 times.

Company Strengths

1. Established players with Early Mover advantages: As an early player in the EV charging market, Exicom can capture higher market share in the residential and public charging segments.
2. High barrier industries: According to the CRISIL report, the EV charging industry has high barriers to entry with respect to technological advancements, grid infrastructure compatibility, partnerships and alliances.
3. Domain expertise and product knowledge: Starting out as a significant power solutions provider, the company gained a competitive advantage in terms of product knowledge. In addition to this, having an experienced R&D team means that the company can always remain innovative.
4. Vertically integrated operations: The company’s three manufacturing units are vertically integrated, providing solutions from concept to design engineering and prototype testing all in-house.
5. Long-standing relationships with customers: Since starting operations as a significant power solutions provider to BSNL, Exicom has added several clients such as Jio-Infocom and Indus Towers. The company also enjoys partnerships with other renowned brands in the EV space.

company’s weaknesses

1. Electric vehicle businesses in high demand: The EV charger business relies heavily on the growing adoption of the EV industry for its own performance. A rapid change in mobility or a slowdown in EV adoption can have a major impact on your company.
2. Dependence on telecommunications providers: For its vital power business, the company relies heavily on telecom providers such as BSNL, Jio, Indus towers and others. The loss of business from such a behemoth, which brings in nearly 50% of its revenue, could be detrimental to the company.
3. Dependence on imports: The company imports nearly 65% ​​of its raw material requirements. For lithium-ion cells, battery packs, and semiconductors, we rely on countries such as China, Singapore, Hong Kong, and South Korea.
4. Ongoing requirements for research and development: The success or failure of a business largely depends on how a company keeps up with constantly changing technology. Exicom currently spends approximately 2% of its sales on R&D.

Exicom Tele-Systems Limited – GMP

Shares of Exicom Tele-Systems Ltd were trading at a premium of 64.08% in the gray market on February 22, 2024. The stock in Gray Market was trading at Rs 233. This gives a premium of Rs 91 per share to the ceiling price of Rs 142. .

Exicom Telesystems IPO Key Information

promoter: Nextwave Communications Pvt ltd and Anant Nahata

Book Operations Lead Manager: Monarch Networth Capital Ltd, Unistone Capital Pvt ltd and Systematix Corporate Services Ltd

Proposal registered by: Link Intime India Pvt Ltd

purpose of the problem

1. Rs 145.7 Cr will be used to set up production/assembly lines at the planned manufacturing facility in Telangana.
2. Rs 50.3 Cr will be used to repay the company’s borrowings.
3. Rs 69 Cr will be used to finance the working capital requirements of the company.
4. Rs 4 Cr is spent on product development and R&D.
5. The remaining amount will be used for general corporate purposes.

conclusion

In conclusion, Exicom Tele-Systems has a strong presence in the field of critical power solutions and has recently entered the EV charging business. As an entrant in a new and developing industry, the company has an Early Mover advantage. Its strengths include domain expertise, vertically integrated operations and long-standing customer relationships. However, the industry is constantly evolving. Exicom must keep up to date with evolving trends.

Exicom Tele-Systems Limited IPO review issue appears to have been well planned with the proceeds being used for capital expansion, R&D and working capital requirements. However, the valuation the company is offering its stock at appears to be quite outrageous. Would you be willing to support the upcoming IPO of Exicom Tele-Systems with a price-to-earnings ratio of 206x? Let us know in the comments below.

Written by Nasir Hussein

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