Company Note- Kaynes Technology India Ltd.

Market Cap- 4500cr | ROCE- 26% | ROE- 24% | Valuations- Not available

Introduction
Kaynes Technology India is an end-to-end and IoT-enabled integrated electronic systems design
and manufacturing (ESDM) services company. The company offers box build, printed circuit
board assembly, product engineering, and IoT solutions, as well as original design manufacturing
services. It has strong experience in conceptualizing design, process engineering, integrated
manufacturing, and life-cycle support. It serves automotive, industrial, aerospace, defense, outer
space, nuclear, medical, railways, IoT/information technology, and other industries. The
company was founded in 1988 and is based in Mysore, India.

About the IPO

Issue Size- 857.82cr; Fresh Issue- 530cr and Offer for Sale- 327.82cr
Application of proceeds- 250cr to be used for the expansion of an existing facility and for setting
up a new one; 130cr for repayment of borrowing; and 115cr for funding the WC requirement.

Guidance
Revenue Order Book Margin Industry Growth Trends
FY2023- 1250cr Current- 2200cr EBITDA Margins- The total addressable ESDM market in
FY2024- 1800cr FY2023- 2000- Current- 13.3% and India was valued at INR 2.7tn in FY21,
2500cr Existing Order Book which is expected to grow to INR 10tn
FY2028- $1Bn Execution at 14.5% by FY26 with a CAGR of 30.3%.
However, the contribution of India’s
PAT Margins- 8-9% ESDM companies is ~40%, which is
valued at INR 1.1tn, which is likely to
post at a 41.1% CAGR to reach INR
6.0tn by FY26

Revenue Mix and Margin Profile

Across Segments Across Verticals Across Geographies
OEM- Box Build – 28% Automobile – 33% Domestic – 80%
OEM- PCBA – 63% Industrial – 30% International:
ODM – 4% Medical – 10% North America – 6%
IoT Solutions – 5% Railways – 10% Europe – 11%
IoT and Consumer – 14% Others – 3%
Aerospace & Defense – 3%
ODM business has better Gross margin from various verticals is as Margins are higher in the
margins compared to OEM under. However, margin at EBITDA level export business. The
and the company looks to is similar in all verticals. company aims to achieve a
increase the share of Railways/Aerospace & Defence – 40-45% revenue mix of 60:40 in the
business from ODM. Industrials/Medicals – 30-35% coming 3-4 years between
Consumer/Automotive – 25-27% domestic and exports.
Kaynes is the only company within the space catering to the railways. Management is bullish on
high-margin segments, such as railways and defence, while it aims to sustain growth in
automotive and industrials. Targeted revenue contribution; railways- 15% and Defense- 7.5%

Disclaimer: This report is for the personal information of the authorized recipient and does not construe to be any advice to you. Prodigy
Investment Management is not soliciting any action based upon it. This report is not for public distribution and has been furnished to
you solely for your information and should not be reproduced or redistributed to any other person in any form.
1
302, Mittal Avenue, Kala Ghoda, Fort, Mumbai 400 001. India Tel: +91 22 22875801
The company’s order book as on 30th June 2022 stood at Rs 2200cr with an execution timeline
of over 12-18 months. 10% of the order book is from a new business line or vertical. The order
book grew by 6.4x over FY20 from Rs 350cr to Rs 2200cr. This quantum jump in order booking
was due to a low base during the Covid period.

Customer concentration and Average Order Value- The top 10 customers contribute ~51% of
revenue currently which the company aims to bring down to 45% by FY25E. The value of each
customer order has been increasing from an average order size of Rs14.9 lakh in FY20 to an
average order size of Rs55.3 lakh in FY22, at a CAGR of 92.44% in 2 years. Its average business
period relationship stands at 8-9 years.

Manufacturing Capability- The company has eight manufacturing facilities, one design facility,
two service centers, and one packaging and dispatch facility. It has a combined capacity to
assemble over 150cr (on an annualized basis) components for the period and have an exclusive
line for ‘Green Manufacturing’. The facilities are strategically located near its customers which in
its experience helps reduce logistics costs, increase efficiency and ensure minimal capital
expenditures. Its facilities are scalable allowing them to expand its capacity within a short time
period without incurring the significant capital expenditure.

Capital Expenditure- From its IPO proceeds, Kaynes had earmarked a CAPEX of INR 250cr, of
which INR 150cr was apportioned for a new facility at Chamarajanagar, Karnataka, and the rest
to be utilized to expand capacity at existing plants (INR 50cr at Mysuru, Karnataka, and INR 50cr
at Manesar, Haryana). The new facility would be operationalized by April 2023 before the
schedule (September 2023) due to a huge order book build-up. As on FY22, the asset turnover
ratio stood at 4.8x, and this could rise to 7.0x as per management.

Other Information- In defense, it provides components for gun sights to Tonbo Imaging; from
FY24, it would start getting orders from Honeywell Automation. Under IoT, the Company has
partnered with Hitachi for its signaling business in Metros.
Current NWC days stand at 98 days and the company aims to bring it down gradually to 75-77
days by FY25.

Competitive Landscape- The company is in direct competition with Amber Enterprises Limited,
Dixon Technologies and its recently listed peer - Syrma SGS Technologies.

Disclaimer: This report is for the personal information of the authorized recipient and does not construe to be any advice to you. Prodigy
Investment Management is not soliciting any action based upon it. This report is not for public distribution and has been furnished to
you solely for your information and should not be reproduced or redistributed to any other person in any form.
2
302, Mittal Avenue, Kala Ghoda, Fort, Mumbai 400 001. India Tel: +91 22 22875801
Opinion

The company has had a stellar FY2022 and has given strong growth guidance for FY2023 and
FY2024. Much of it is backed by the multi-fold rise in its order book which has an executional
time frame of 12-18 months and the remaining confidence comes from the existing inquiry
pipeline The ESDM business is expected to grow at 30% CAGR over the next four years, according
to a Frost & Sullivan industry study report, while Indian enterprises are expected to grow at
40%+ CAGR over the same time period. The company is investing the IPO proceeds in expanding
its manufacturing capacities to meet this increased demand and has over the years developed a
strong R&D capability to diversify its product portfolio and provide value-added services. The
current focus appears to be on expanding its customer base to concentrate on large customers
and capitalising on verticals with promising futures, such as railways and defence. The company
is doing backward integration of its manufacturing facilities to improve operational efficiencies
and pursue growth through selective partnerships and acquisitions. Despite these promising
signs, the business nevertheless faces fierce competition and is dependent on an ongoing supply
of semiconductors from the overseas market, which is also experiencing difficulties and poses a
threat to its supply chain.

Product Portfolio

Disclaimer: This report is for the personal information of the authorized recipient and does not construe to be any advice to you. Prodigy
Investment Management is not soliciting any action based upon it. This report is not for public distribution and has been furnished to
you solely for your information and should not be reproduced or redistributed to any other person in any form.
3
302, Mittal Avenue, Kala Ghoda, Fort, Mumbai 400 001. India Tel: +91 22 22875801
Financials & Ratio Analysis

Disclaimer: This report is for the personal information of the authorized recipient and does not construe to be any advice to you. Prodigy
Investment Management is not soliciting any action based upon it. This report is not for public distribution and has been furnished to
you solely for your information and should not be reproduced or redistributed to any other person in any form.
4
302, Mittal Avenue, Kala Ghoda, Fort, Mumbai 400 001. India Tel: +91 22 22875801