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The initial public offering of Chennai-based technology-focused engineering and design company, Syrma SGS Technology, was subscribed 2.27 times Wednesday.
Syrma’s public offer received bids for 6.48 crore equity shares against the IPO size of 2.85 crore shares, as per the data available on exchanges. The company’s IPO includes Rs 766 crore in fresh shares and Rs 74 crore worth of secondary share sale – that is shares that will be offloaded by promoters during the IPO.
Subscription to Syrma’s IPO was primarily led by non-institutional investors who put in bids 3.58 times their reserved portion. Retail investors bought shares 2.66 times the allotted quota and the portion of the offer set aside for qualified institutional buyers (QIBs) was subscribed 71%. The company’s IPO will close on Thursday, August 18.
How is the company’s financial health and what are the risks in its business?
The company posted revenue growth of 43% to Rs 1,267 crore in FY22 compared to the year ended March 2021. The company’s net profit grew by 17% to Rs 76.46 crore in March 2022.
According to the company’s filing with the Securities and Exchange Board of India (SEBI), Syrma is currently undertaking manufacture of modules for 5G technology infrastructure. The company entered the automotive end-use industry in 2007 and since then has manufactured vehicle tracking systems and toll management systems in 2009, and beacons for vehicles in 2012. “Considering the advancement of electric vehicles, we have also commenced manufacturing of controllers of the EV battery management systems in 2020,” Syrma said in its filing.
The company currently has a total of 11 manufacturing facilities in states like Himachal Pradesh, Haryana, Uttar Pradesh, Tamil Nadu and Karnataka. It also has three dedicated R&D facilities, two of which are located in Chennai and Gurgaon and one in Stuttgart, Germany. It counts firms like TVS Motor Company, Robert Bosch Engineering and Business Solution, Eureka Forbes and Hindustan Unilever among its clients.
In its red herring prospectus (RHP), Syrma said that one of the key challenges to its business is that its customers “do not make long-term commitments” to the company and could cancel or change their production requirements. “Such cancellations or changes may adversely affect our financial condition, cash flows and results of operations,” Syrma said.
Another risk is the company incurring high expenses while manufacturing and adhering to quality standards.
“The strict quality requirements required to be complied with by us result in us incurring significant expenses to maintain our product quality. Any failure may adversely affect our reputation, financial conditions, cash flows and results of operations,” Syrma said in its RHP.
