What you must know about Electro Force (India) IPO?

Electro Force (India) Ltd was incorporated in the year 2010 to design and manufacture electrical components and metal/plastic contact parts for India's electronics, lighting, switchgear, and allied industries. Electro Force (India) Ltd designs and manufactures stamping components and plastic components by metal stamping, injection molding and insert molding for electrical MCBs (Miniature Circuit Breakers), 63A electrical manual transfer switches, electrical MCCBs & RCBs, brushless DC motors etc. In addition, Electro Force (India) Ltd also provides quality testing, packaging, assembly, secondary operations, and logistics services. Its manufacturing facility at Vasai is spread across 10,000 SFT. The expertise stack of Electro Force (India) Ltd  includes product designing, prototyping, and process development for precision sheet metal components & plastic products & assemblies for the electrical & switchgear industry.

Electro Force (India) Ltd  has a range of core manufacturing capabilities that enable it to provide customers with high-quality solutions. These capabilities include high speed sheet metal stamping, injection and insert molding, progressive cold forging, high frequency welding, and automated and manual assembly and testing. The company has consistently maintained its commitment to exceptional quality, on-time delivery, and cost-effective solutions that meet unique customer requirements. The issue is a combination of a fresh issue and an offer for sale.

Highlights of the SME IPO issue of Electro Force (India) Ltd

Here are some of the highlights of the Electro Force (India) Ltd IPO on the SME segment of the National Stock Exchange (NSE). 
    • The issue opens for subscription on 19th December 2023 and closes for subscription on 21st December 2023; both days inclusive.

    • The company has a face value of ₹10 per share and it is a fixed price issue. The issue price for the fresh issue IPO has been fixed at ₹93 per share. Being a fixed price issue, there is no question of price discovery in this IPO. 

    • The IPO of Electro Force (India) Ltd has a fresh issue component and an offer for sale (OFS) portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.

    • As part of the fresh portion of the IPO, Electro Force (India) Ltd will issue a total of 60,00,000 shares (60 lakh shares), which at the fixed IPO price of ₹93 per share aggregates to a total fund raising of ₹55.80 crore.

    • As part of the offer for sale (OFS) portion of the IPO, Electro Force (India) Ltd will sell a total of 26,74,800 shares (26.75 lakh shares approximately), which at the fixed IPO price of ₹93 per share aggregates to a total fund raising of ₹24.88 crore.

    • The entire offer for sale shares is being sold by the promoter shareholder of Electro Force (India) Ltd. A total of 26,74,800 shares will be offer as part of the OFS by Ayesspea Holdings and Investments Private Ltd.

    • Therefore, the total IPO size will also comprise of the issue and sale of 86,74,800 shares (86.75 lakh shares approximately) which at the fixed IPO price of ₹93 per share will aggregate to overall IPO size of ₹80.68 crore.

    • Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 4,35,600 shares. The market maker for the issue is Arham Shares Private Ltd and they will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.

    • The company has been promoted by Ayesspea Holdings and Investments Private Ltd, Garuda Television Private Ltd, and Pravin Kumar Brijendra Kumar Agarwal. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 62.93%.

    • The fresh issue funds will be used by the company for pursuing inorganic growth strategies and for funding the working capital gaps. Part of the monies raised will also go towards meeting the general corporate expenses of the company.

    • First Overseas Capital Ltd will be the lead manager to the issue, and Skyline Financial Services Private Ltd will be the registrar to the issue. The market maker for the issue is Arham Shares Private Ltd.

IPO allocation and minimum lot size for investment

Electro Force (India) Ltd has allocated 5.02% of the issue size for the market makers to the issue, Arham Shares Private Ltd. The net offer (net of market maker allocation) will be divided equally between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of Electro Force (India) Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹111,600 (1,200 x ₹93 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 2,400 shares and having a minimum lot value of ₹223,200. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the Electro Force (India) Ltd IPO (SME)

The SME IPO of Electro Force (India) Ltd IPO opens on Tuesday, December 19th, 2023 and closes on Thursday, December 21st, 2023. The Electro Force (India) Ltd IPO bid date is from December 19th, 2023 10.00 AM to December 21st, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is December 21st, 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Electro Force (India) Ltd

The table below captures the key financials of Credo Brands Marketing Ltd (MUFTI) for the last 3 completed financial years. 

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.     

• The revenue has been volatile. After doubling in FY22, the revenues have fallen sharply in FY23. In terms of net profits, the company only turned around in FY22 from losses, but profits have fallen in the year FY23.

• The net margins have been in the range of 25-26% in the latest year and the previous fiscal year, which is very attractive. Here again, the comparisons are tough since the company had been making net losses till FY21 and so only the latest year is relevant.

 • Being a capital heavy business, the asset turnover ratio or the asset sweating ratio has been below par. This may not be too representative due to front-ending of investments and hence the ROA should do the job much better.
The company has latest year EPS of ₹4.60 and weighted average EPS of ₹3.74 for the last 3 years. However, a lot will depend on what level the EPS sustains in the long run since growth has been quite erratic in the last 3 years. By latest year valuations, the company looks reasonably priced, so it is the sustainable EPS that will matter. The focus would be on the next few quarters. This is generally a cyclical business, but the high margins should hold the company in good stead. Investors can look at the company from a longer term perspective and the risk appetite also needs to be higher for this stock.