September 04, 2017 DIXON TECHNOLOGIES (INDIA) LIMITED

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September 04, 2017 DIXON TECHNOLOGIES (INDIA) LIMITED DIXON TECHNOLOGIES (INDIA) LIMITED September 04, 2017 SMC Ranking (3/5) About the Company Issue Highlights Incorporated in 1993, Dixon Technologies is engaged in manufacturing products in the Industry Consumer Durable consumer durables, lighting and mobile phones markets. The product portfolio of the Total Issue (Shares) - Offer for sale 3,053,675 company includes (i) Consumer electronics like LED TVs (ii) Home appliances like washing Total Issue (Shares) - Fresh Issue 339,750 machines (iii) Lighting products like LED bulb, tube lights, CFL bulbs etc. and (iv) Mobile Net Offer to the Public 3,393,425 phones. Dixon manufacture products for popular retail brands including Panasonic, Issue Size (Rs. Cr.) 597-600 Price Band (Rs.) 1760-1766 Philips, Haier, Gionee, Surya Roshni, Reliance Retail, Intex Technologies, Mitashi and Offer Date 6-Sep-16 Dish. The company is also a leading Original Design Manufacturer (ODM) in India. The Close Date 8-Sep-16 Company develops and designs products in-house at its R&D facility. The ODM business Face Value 10 contributes over 25% of its revenue. The company has six manufacturing facilities located Lot Size 8 Per Equity Share in the states of Uttar Pradesh and Uttarakhand. Issue Composition In shares Total Issue for Sale 3,393,425 QIB 1,696,713 NIB 509,014 Retail 1,187,699 Shareholding Pattern (%) Competitive Strengths Particulars Pre-issue Post -issue Promoters & promoters group 46.20% 39.21% Leading market position in key verticals: The Company believes that its experience in QIB 28.53% 25.51% manufacturing, successful backward integration and design capabilities, strong NIB 4.35% 4.49% relationships with its global suppliers and anchor customers have helped the company to Retail 20.92% 30.78% Total 100.00% 100.00% achieve leading position in its key verticals. It believes that its leading position has helped *calculated on the upper price band the company in buying critical components at competitive prices, achieves operational efficiencies, helps it in continuing to expand its customer base and further strengthens its Objects of the Issue relationship with anchor customers. It further enhances its ability to diversify into related products and enter new geographies. The Proceeds from the Offer for Sale The proceeds from the Offer for Sale shall be received by the Strong relationships with a diverse top-tier customer base: The Company has Selling Shareholders and Company shall not receive any established and will continue to focus on strengthening its long-standing relationships with proceeds from the Offer for Sale. well-known customers across product verticals. The company believes that its customers Objects of the Fresh Issue Company proposes to utilise the Net Proceeds towards are long term reputed players in the industry. Its relationships with them have enabled the funding the following objects: company to continuously develop, diversify and improve its product portfolio, plan its Repayment/pre-payment, in full or in part, of certain production in anticipation of demand from retail customers and ensure continuous focus on borrowings availed by the Company; quality. Such long term business relationships stem from its commitment to quality Setting up a unit for manufacturing of LED TVs at the Tirupati Facility; products and timely delivery of customers’ orders under tight delivery schedules and short Enhancement of its backward integration capabilities in the production lead time. Its major customers include lighting products vertical at its Dehradun I Facility; Global brands: Panasonic India Private Limited, Philips Lighting India Limited, Haier Upgradation of the information technology infrastructure of the Appliance (I) Pvt. Ltd., Gionee Company; and General corporate purposes. National brands: Intex Technologies (I) Ltd., Surya Roshni Limited Domestic retail private labels: Reliance Retail Limited, Vijay Sales Book Running Lead Manager IDFC Bank Limited Regional brands in Tier I and Tier II cities: Mitashi Edutainment Pvt. Ltd., Abaj IIFL Holdings Limited Electronics Pvt. Ltd. Motilal Oswal Investment advisors limited End to end solutions provider with dedicated research and development Yes Securities (india) Limited capabilities: The Company believes that its dedication to design, manufacturing and its Name of the registrar Karvy Computer share pvt. Ltd service infrastructure ensure customer satisfaction, foster customer loyalty and generate repeat business. Its capabilities which enable the company to provide end-to-end solutions 1 are (i)Research and development (ii) Global sourcing(iii) Backward integration (iv) Reverse Logistics. As at July 31, 2017, its R&D team consisted of 22 employees including electrical engineers. Its R&D centre located at Noida has access to latest equipment such as photometric system for light source and colour analysers. The company has received awards, such as the ‘Development Excellence Award (semi-automatic washing machine)’ from Panasonic India Private Limited in 2016. Flexible and cost-effective manufacturing capabilities: The Company has a proven track record of serving product requirements of its customers and it continues to pursue greater efficiencies of cost, time, quality and scale in its manufacturing processes. The company maintains the flexibility of its manufacturing facilities by measures such as multiple-function training and standardization of equipment. Due to its cost-effective solutions, the company is able to offer prices which are competitive to similar products imported from China in some of its product verticals. Most of its manufacturing facilities are ISO 9001: 2008 and ISO 14001: 2004 certified in accordance with international quality standards. Strong Financial Performance and stable cash flows: The Company has a track record of sustained growth in revenue and profitability. Over the last five fiscals ended March 31, 2017, the company has achieved a CAGR of 33.78% in revenue from operations (net) and 44.36% in EBITDA. Further, as on March 31, 2017, its long-term borrowings to equity ratio was 0.07. During the Fiscals 2017, 2016, 2015, 2014 and 2013, it has reported RoCE of 36.53%, 27.92%, 15.97%, 14.73% and 9.92%, respectively. Strategies Continue to focus on ODM model: While OEM sales continue to be a major source of its revenue, the company plans to gradually expand its share of the ODM model of manufacturing. As an ODM, it controls the entire manufacturing cycle of a product from the initial stage of designing and are responsible for all the aspects of manufacturing, including planning and sourcing of raw materials and components. Its strategy to move towards the ODM model is to service all major customer requirements across the industry and product verticals. This also helps the company in improving its overall profitability as the company is able to control all aspects of the manufacturing cycle Continue to strengthen its existing product portfolio and diversify into products with attractive growth and profitability prospects: The company plans to continue to increase offerings in its current product verticals as well as diversify into new verticals by tapping into segments which in the view of its management has attractive growth prospects and higher return ratios where it has distinctive competence and compelling value propositions. The company expects to gain additional opportunities in the home appliances and lighting product segments. The company in the past exported CFL bulbs and LED bulbs to Thailand, Egypt, France, UK, Poland, Tanzania and Kenya and continue to export CFL and LED bulbs. The company plans to continue to enter into joint ventures to initiate diversification into new product segments. Development of its service offerings: With a focus on increasing its expertise as an end-to-end solutions provider, the company plans to further expand its reverse logistics portfolio with support of its R&D team. As an extension of its value added services in the reverse logistics vertical, it has also recently started spare parts management for a mobile phone brand. The company believes that the reverse logistics vertical provides high return on capital employed and has a high potential for growth. Currently, the company focuses only on B2B reverse logistics and do not have consumer facing service centres which are in line with its strategy of building relationships with brand owners and OEMs. Expand existing relationships with customers into other product verticals: The Company plans to continue to focus on customers with whom it has long-standing relationships in order to develop and supply more sophisticated, higher margin products. Its experienced R&D team enables the company to bring innovations to its existing customers that translate into new opportunities. It believes that its R&D team has the ability to add new features to existing products and develop new product lines and customized software. 2 Expansion of industrial footprint into new geographies: The Company seeks to expand its geographical footprint by enhancing current manufacturing capacities and setting up of new manufacturing facilities, especially in South India. The company is in the process of setting up a new manufacturing facility in Tirupati, Andhra Pradesh. The company also seeks to further enhance its manufacturing capacity across its product verticals as well as set up infrastructure for manufacturing of CCTVs and DVRs, through its joint venture, ADTPL, at the Tirupati Facility. It believes that this would further help the
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