Syrma SGS Technology Ltd IPO : 7 things to know

Syrma SGS Technology Ltd, a Chennai based; tech focussed engineering and design company, has filed its draft red herring prospectus (DRHP) in January 2022 and SEBI is yet to give its observations and approval for the IPO.

Normally, the IPOs are approved by SEBI within a period of 2 to 3 months unless there are other queries or clarifications that the regulator has. The IPO of Syrma SGS Technology Ltd will be a combination of a fresh issue and an offer for sale and the next steps in the IPO process will commence once the approval from SEBI is received.
 

7 interesting facts to know about the Syrma SGS Technology Ltd IPO

1) Syrma SGS Technology Ltd has filed for an IPO with SEBI which comprises of a fresh issue of 926 lakh shares and an offer for sale of 33,69,360 shares or 33.69 lakh shares.

However, since the price band for the proposed IPO has not been announced still, the size of the fresh issue / IPO / offer for sale is not precisely know.

However, the company disclosed in the draft red herring prospectus that total issue size would be around Rs.1,200 crore, so the OFS component should be around Rs.276 crore or thereabouts but we still await the final word on the pricing and other issue details from Syrma.

2) Let us talk about the offer for sale (OFS) portion of the Syrma SGS Technology IPO first. A total of 33,69,360 shares or approximately 33.69 lakh shares will be sold by the promoters as part of the offer for sale.

Veena Kumari Tandon, part of the promoter group, will sell the entire quantity of 33,69,360 shares as part of the OFS. The OFS component will not result in any fresh fund infusion or dilution of the capital or the EPS.

However, the selling of stake by the promoter will increase the free float of the company and facilitate listing of the stock.

3) The fresh issue portion will be worth Rs.926 crore and will account for bulk of the issue size in this case. Let us look at how the fresh funds would be allocated by the company.

Syrma SGS will be using part of the fresh issue proceeds to bankroll its capital expenditure plans to expand its manufacturing and its R&D facilities. Part of the fresh funds will also go towards working capital needs of the company while a small share will be set aside for general corporate purposes.

The fresh issue will not only dilute the capital base but also dilute the EPS of the company. It will also indirectly reduce the promoter stake in the company and enhance the public stake in Syrma SGS.
 

4) Syrma SGS Technology is based out of the southern city of Chennai in Tamil Nadu. It is a tech-focused engineering and design company and is largely into turnkey production on a contract basis. It provides electronics manufacturing services (EMS) facilities to global original equipment manufacturers (OEMs).

Some of the most popular end-user industries that use the services of Syrma SGS Technology include such verticals like industrial appliances, automotive, healthcare, consumer products and IT.

5) Syrma SGS Technology is in talks with the book running lead manager (BRLMs) to the issue to explore the possibility of a rights issue to existing shareholders. It is also exploring the possibility of doing a pre-IPO private placement or preferential allotment under the extant rules up to a sum of Rs.180 crore.

If the company issues equity shares through the pre-IPO route, it will reduce the size of the fresh issue proportionately. The pre-IPO placement comes with greater leeway in pricing the issue but a longer lock-in period compared to the anchor placement.

6) Syrma SGS Technology reported net profits of Rs.28.61 crore for the financial year 2020-21 and the company also reported top line income of Rs.445 crore.

While the sales are higher on a YoY basis, the net profits are lower due to pressure on input costs during this period.

The company has decided to allocate 50% of the issue size to the qualified institutional buyers (QIBs), 15% to the non-institutional investors (NII/HNI) and the balance 35% to retail investors.

7) The IPO of Syrma SGS Technology Ltd will be lead managed by ICICI Securities, IIFL Securities and DAM Capital Advisors (formerly IDFC Securities). They will act as the book running lead managers or BRLMs to the issue.

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