Handset maker Lava International files for IPO as revenue, profit jump

Mobile handset maker Lava International Ltd has filed its draft red herring prospectus with the Securities and Exchange Board of India to raise funds through an initial public offering (IPO).

The IPO comprises a fresh issuance of shares worth Rs 500 crore and an offer for sale of 4.37 crore shares by its promoters and other shareholders, according to the DRHP.

The selling shareholders include the company’s promoters and directors Hari Om Rai, Shailendra Nath Rai, Sunil Bhalla and Vishal Sehgal. Hari Om Rai, who is Lava’s chairman and managing director, will sell 1.25 crore shares while Shailendra Nath Rai will offload 31.35 lakh shares. Bhalla and Sehgal will divest 78.38 lakh shares each. The four promoters together own a 79.33% stake in the company.

China’s Unic Memory Technology will sell its entire 1.95% stake, or almost 1.13 crore shares, in Lava.

Lava will use the money raised from the fresh issue for marketing and brand building activities, funding acquisitions and other strategic initiatives. It will also use the cash to invest in its subsidiaries and fund its working capital requirements.

Lava International’s business

The company was co-founded by Hari Om and Shailendra Nath Rai and Bhalla in 2009. Sehgal joined in 2010.

The company designs, makes, markets, distributes and services mobile handsets, tablets and other electronics accessories under its own ‘LAVA’ and ‘XOLO’ brands. It also provides value-added software services.

It recently signed a partnership license agreement with Lenovo to distribute mobile handsets that it makes under the Motorola brand in India and overseas. It has also signed a multi-year contract with HMD Global to design, manufacture and distribute mobile handsets under the Nokia brand in India and overseas.

It has presence in many emerging markets, such as Thailand, Sri Lanka, the Middle East, Bangladesh, Mexico, Indonesia and Nepal.

According to Frost & Sullivan, Lava is the third-largest feature phone company in India with a market share of 13.4%, in terms of sales volume in 2020-21. According to F&S, it had a market share of 10.2% in the segment of phones that cost less than $70 in India in 2020-21.

Lava is also the fifth-largest feature phone company in the world with a market share of 5% in terms of sales volume in 2020, according to Frost & Sullivan.

Lava International’s financials

The company’s total income increased from Rs 5,128.75 crore for the financial year 2018-19 to Rs 5,523.68 crore for 2020-21. During this period, its total mobile handset sales rose from Rs 3,751.27 crore to Rs 4,360.83 crore.

Its EBITDA has increased from Rs 183.2 crore to Rs 251.2 crore over the same period, representing a compound annual growth rate of 17.1%. Its profit after tax has climbed to Rs 172.6 crore for 2020-21 from Rs 107.76 crore and Rs 73.18 crore for 2019-20 and 2018-19, respectively.

The company generated revenue from operations of Rs 5,512.8 crore during 2020-21. Of this, 29.33% was derived from the Indian market and 70.67% was derived from the international markets.

Its aggregate sales in international markets have grown by a CAGR of 30% from Rs 2,306.22 crore in the financial year 2018-19 to Rs 3,897.28 crore in 2020-21.