What you must know about Exicom Tele Systems IPO?

Exicom Tele-Systems Ltd – About the company

Exicom Tele-Systems Ltd was incorporated in the year 1994 specializing in power systems, electric vehicle (EV) charging, and other related 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 Exicom Tele-Systems Ltd is the EV Charging Solutions vertical. As of date, Exicom Tele-Systems Ltd 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.

As of date, Exicom Tele-Systems Ltd  is among the early entrants to enter India's EV charger manufacturing segment. This is the business which has a high visibility in terms of growth in the coming years as India moves towards green mobility. Exicom Tele-Systems Ltd  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). 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.

The fresh funds will be used to part finance the cost of its assembly line in Telangana, repayment of debt, funding working capital gaps and also to invest in R&D. Promoters currently hold 93.28% in the company, which will get diluted post the IPO to 69.56%. The IPO will be lead managed by Monarch Networth Capital Ltd, Unistone Capital Private Ltd, and Systematic Corporate Services Ltd. For the IPO of Exicom Tele-Systems Ltd; Bigshare Services Private Ltd will be the registrar.

Highlights of the Exicom Tele-Systems IPO Issue

Here are some of the key highlights to the public issue of Exicom Tele-Systems IPO.

• Exicom Tele-Systems IPO will be open from February 27th, 2024 to February 29th, 2024; both days inclusive. Exicom Tele-Systems IPO has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹135 to ₹142 per share.
   
• Exicom Tele-Systems IPO will be a combination of fresh issue of shares and an offer for sale (OFS) component in the IPO. The fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership.
   
• The fresh issue portion of the Exicom Tele-Systems IPO comprises the issue of 2,31,69,014 shares (231.69 lakh shares approximately), which at the upper price band of ₹142 per share will translate into a fresh issue size of ₹329 crore.
   
• The offer for sale (OFS) portion of the Exicom Tele-Systems IPO comprises the sale of 70,42,200 shares (70.42 lakh shares approximately), which at the upper price band of ₹142 per share will translate into an OFS size of ₹100 crore.
   
• The entire OFS of 70,42,200 shares worth ₹100 crore will be sold by NextWave Communications Private Ltd, one of the promoter group companies. This will reduce the promoter holding to the extent.
   
• Thus, overall Exicom Tele-Systems IPO will comprise of the issue and sale of 3,02,11,214 shares (302.11 lakh shares approximately) which at the upper end of the price band of ₹142 per share aggregates to total issue size of ₹429 crore.

The IPO of Exicom Tele-Systems Ltd will be listed on the NSE and the BSE on the IPO mainboard.

Promoter holdings and investor quota allocation quota

The company was promoted by NextWave Communications Private Ltd and Anant Nahata. As per the terms of the offer, not less than 75% of the net offer is reserved for the qualified institutional buyers (QIBs), while not more than 10% of the net offer size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors. The table below captures the gist of the allocation to various categories.

It may be noted here that the Net Offer above refers to the quantity net of employee and holding company employee quota, if any. In the Exicom Tele-Systems IPO, there is no reservation for employees. The anchor portion, will be carved out of the QIB portion and the QIB portion available to the public will be reduced proportionately. The anchor allocation will be opened and also closed on the day before the opening of the IPO.

Lot sizes for investing in the Exicom Tele-Systems IPO

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Exicom Tele-Systems Ltd, the minimum lot size is 100 shares with upper band indicative value of ₹14,200. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the Exicom Tele-Systems IPO.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for Exicom Tele-Systems IPO and how to apply?

The issue opens for subscription on 27th February 2024 and closes for subscription on 29th February 2024 (both days inclusive). The basis of allotment will be finalized on 01st March 2024 and the refunds will be initiated on 04th March 2024. In addition, the demat credits are expected to also happen on 04th March 2024 and the stock will list on 05th March 2024 on the NSE and the BSE. Exicom Tele-Systems Ltd will test the appetite for such industrial support stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 04th March 2024 under ISIN (INE777F01014). Let us now turn to the practical issue of how to apply for the IPO of Exicom Tele-Systems Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Exicom Tele-Systems Ltd

The table below captures the key financials of Exicom Tele-Systems Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (FY refers to Apr-Mar period)

There are few key takeaways from the financials of Exicom Tele-Systems Ltd which can be enumerated as under

1. In the last 3 years, revenue growth has been volatile, with the sales lower in the latest fiscal FY23. This is a business that is just about starting to take off and it will see a lot of front ending of costs and back-ending of profits. Hence investors need to have patience. The low PAT margins of under 1% is also indicative of the stress on the company.
    
2. The net profits have grown in the latest year even through the sales were lower as the company has achieved better cost control. However, ratios continue to be quite weak with ROE under 3% and the ROA under 1%. Sustainability of higher levels is the key.
    
3. The company has a comfortable sweating of assets at over 1.00X in the latest fiscal year. The high asset turnover ratio would get magnified once the ROA also picks and the company starts to see the benefits of economies of scale.

Let us turn to the valuations part. On the latest year diluted EPS of ₹0.69, the upper band stock price of ₹142 gets discounted at a P/E ratio of 205-206 times. However, this is misleading numbers as the traction is just starting. If one looks at the H1-FY24 EPS of ₹2.98, then the P/E on the annualized EPS looks a lot more reasonable. Investors have to wait for the traction in the coming years before taking a call.

Here are some qualitative advantages that Exicom Tele-Systems Ltd brings to the table.

• It is an established player with an early mover advantage and that is a moat that is hard to beat. It has its downsides, but in a rapidly changing industry, it is an advantage.
   
• The operations are vertically integrated and are backed by manufacturing at the back end and supply chains at the front end to allow seamless delivery of solutions.
   
• Strong track record among institutional and corporate customers of service delivery and on-time execution of projects. That should stand them in good stead.

The company is in a segment that is the future of green energy and green mobility. Hence, the demand is likely to be elevated. The company has managed to break even, but a lot will depend on how it sustains its net margins and ROE over the coming years. The stock is meant for investors who want to bet on the future of green mobility. Returns may be slow to come by, but the move is inevitable. The IPO is suited to the investors with higher risk appetite and having the willingness to hold on for the long term.