Foxconn India Unit Files for Rs.5,054 Cr IPO

Bharat FIH, the Indian unit of Foxconn of Taiwan, has filed its draft red herring prospectus (DRHP) with SEBI for its proposed Rs.5,004 crore IPO. The IPO will comprise of a fresh issue of Rs.2,502 crore and an offer for sale of Rs.2,502 crore. The DRHP normally takes about 2-3 months to get SEBI approval so IPO should happen around the second quarter of 2022.

Foxconn globally is one of the largest contract manufacturers for many high end products including Apple phones. In India, its subsidiary Bharat FIH is predominantly an Electronic Manufacturing Service (EMS) company with specialization in mobile phones. Bharat FIH is the largest contract manufacturer for electronic products in with 15% market share.

Bharat FIH is currently an indirect 100% subsidiary of Foxconn. The parent FIH owns stake in Bharat FIH through Wonderful Stars Pte Ltd. The offer for sale participation will be by Wonderful Stars Pte Ltd. However, FIH has already clarified that its stake will not go below 75% in its India business and it would look to hive off at the most 25% of holdings via OFS.

The utilization of the IPO fresh issue proceeds is quite interesting. Bharat FIH plans to use the IPO proceeds to pay a special dividend to the shareholders of the company. In addition, part of the funds will also be utilized to finance its regular working capital requirement and to have enough cash for its regular operations.

Ironically, the IPO announcement comes at a time when the Foxconn plant near Chennai has been mired in controversy following the food poisoning incident in the company. The plant remains shut during the week and it remains to be seen if the issue will really have a bearing on the prospects of the Bharat FIH IPO.

In India, Bharat FIH derives most of its revenues from the largest selling mobile phone in India, Xiaomi. For the electronics industry, Bharat FIH not only provides contract manufacturing, but also gives them support in design, prototypes, product tweaking, after sales service, repairs and maintenance etc.

While mobile phones are the big segment of Bharat FIH, it also has a strong franchise in outsourcing the production of electric vehicles, television sets and hearables. In India, Bharat FIH faces competition from other professional outsourcing companies like Dixon, Flextronics, Jabi, Optiemus Infracomm etc.

The IPO of Bharat FIH will be lead managed by Citigroup Global Markets, BNP Paribas and HSBC Securities. They will act as the book running lead managers or the BRLMs.

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