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Syrma SGS Techno IPO review (Apply)

Review By Dilip Davda on August 8, 2022

•    SSTL is one of the fastest-growing companies in India in the EMS segment.
•    It is also one of the leading players in customized RFID tags.
•    For FY22 it marked growth in the top line, but the bottom line witnessed pressure.
•    The company is focusing on a high-margin product portfolio for marquee customers.
•    Though the issue appears fully priced, investment for the medium to long term can be considered.

Amidst reforms proposed by SEBI and RBI for a primary market that impacted Anchor Investors, HNIs and also the modified process of IPO subscription data, we witnessed an almost over two and half months gap for mainboard IPOs. Finally, we are having IPO from Syrma SGS Technology Ltd. 

This company is surprisingly coming with IPO at a lower price than the pre-IPO price. The management attributed this as an investor's friendly gesture as global market moods have changed and prevailing uncertainty. Due to the pandemic, it suffered pressure on its margins but is not gearing for a high-margin product portfolio for its marquee customer base. 

Syrma SGS Technology Ltd. (SSTL) is a technology-focused engineering and design company engaged in turnkey electronics manufacturing services ("EMS"), specializing in precision manufacturing for diverse end-use industries, including industrial appliances, automotive, healthcare, consumer products and IT industries. 

According to the F&S Report, among the large bouquet of EMS players in India, SSTL is one of the fastest-growing Indian-headquartered ESDM companies. The Company is also among the top key global manufacturers of custom RFID tags (Source: F&S Report). Its current product portfolio may be categorized as follows:

- Printed circuit board assemblies ("PCBA"): Our PCBAs are used in products manufactured in the automotive, medical, industrial, IT and consumer products industries, and shall include box-build products;

- Radiofrequency identification ("RFID") products: Our RFID products are used in products manufactured in the shipping, healthcare, manufacturing, retail and fintech industries;

- Electromagnetic and electromechanical parts, which include magnetic products like chokes, inductors, magnetic filters, transformers as well as high volume manufacturing assemblies: Our electromagnetic and electromechanical parts are used in products manufactured in the automotive, industrial appliances, consumer appliances and healthcare industries, among others; and

- Other products, include motherboards, DRAM modules, solid state drives, USB drives and other memory products.

SSTL currently operate through 11 strategically located manufacturing facilities in north India (i.e. Himachal Pradesh, Haryana and Uttar Pradesh) and south India (i.e. Tamil Nadu and Karnataka). Its presence in these states enables it to efficiently cater to the requirements of customers in north and south India. SSTL's manufacturing facilities in Tamil Nadu are located in a special economic zone and our manufacturing facility in Haryana has been set up under the Electronic Hardware Technology Park scheme, which allows it to avail of certain tax and other benefits in respect of the products manufactured out of these facilities. 

As of March 31, 2022, SSTL has 849 permanent employees and 3,886 persons employed as contract labour / temporary employees and retainer ship employees. 

Out of the 11 manufacturing facilities currently operated by SSTL, two facilities collectively contribute to more than 80% of its total revenue from operations and this raises a concern. 

To part finance its need for funding of R & D facility development/ expansion and setting up of a new manufacturing facility (Rs. 403.00 cr.), working capital (Rs. 131.58 cr.) and general corporate purposes, SSTL is coming out with a maiden combo IPO of fresh equity issue worth Rs. 766 cr. of Rs. 10 each (approx. 34818176 shares) and an offer for sale of 3369360 shares (worth Rs. 74.13 cr. at the upper cap) making an overall IPO size of Rs. 840.13 cr. The company has announced a price band of Rs. 209 to Rs. 220 per share of Rs. 10 each. The issue opens for subscription on August 12, 2022, and will close on August 18, 2022. The minimum application to be made is for 68 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 21.67% of the post-issue paid-up equity capital of the company.

The company did a pre-IPO placement of 3793103 shares at a price of Rs. 290 per share and has already garnered Rs. 110 cr. from the market. 

Joint Book Running Lead Managers (BRLMs) to this issue are DAM Capital Advisors Ltd., ICICI Securities Ltd. and IIFL Securities Ltd., while Link Intime India Pvt. Ltd. is the registrar to the issue. The company has allocated an IPO quota of 50% for QIBs, 15% for HNIs and 35% for Retail investors. 

Having issued initial equity at par, SSTL issued/converted further equity in the price range of Rs. 100 to Rs. 7204.50 between March 2008 and May 2022. It has also issued bonus shares in the ratio of 100 for 1 in October 2021. The average cost of acquisition of shares by the promoters/selling stakeholder is Rs. 1.57, Rs. 52.88 and Rs. 59.97 cr.

Post-IPO, SSTL's current paid-up equity capital of Rs. 141.41 cr. will stand enhanced to Rs. 176.23 cr. Based on the upper cap of the IPO price, the company is looking for a market cap of Rs. 3877.04 cr.

On the financial performance front, for the last three fiscals, SSTL has (on a consolidated proforma condensed financial performance basis) posted turnover/net profits of Rs. 879.95 cr. / Rs. 91.50 cr. (FY20), Rs. 904.29 cr. / Rs. 65.54 cr. (FY21) and Rs. 1284.37 cr. / Rs. 76.46 cr. (FY22).

For the last three fiscals, it has posted (based on a proforma condensed combined financial performance) an average EPS of Rs. 5.18 and an average RoNW of 14.85%. The issue is priced at a P/BV of 5.19 based on its NAV of Rs. 42.36 as of March 31, 2022, and at a P/BV of 2.66 based on its post-IPO NAV of Rs. 82.78 per share (at the upper cap). 

If we attribute FY22 earnings to post IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 50.69.  Thus the issue appears fully priced even at a lower price compared to the pre-IPO placement price. 

As per offer documents, SSTL has shown Dixon and Amber Enterprise as its listed peers. They are currently trading at a P/E of 131.17 and 157.52 (as of August 08, 2022). However, they are not truly comparable on an apple-to-apple basis. 

The company has not declared any dividends for the reported periods of the offer documents. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

The three BRLMs associated with the offer have handled 63 public issues in the past three years, out of which 24 issues closed below the issue price on the listing date.

Conclusion / Investment Strategy

The company did a pre-IPO placement at Rs. 290 a few months back and now it is coming with IPO at Rs. 220 (at the upper cap). This really augurs well for this IPO, but based on its financial data and earnings, the issue is priced at a P/E of 50+ even at lower IPO pricing. The company is focusing on a high-margin product portfolio. The segment in which SSTL is operating is also poised for bright prospects ahead. Hence investors may consider an investment with medium to long-term perspectives.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on August 8, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Syrma IPO FAQs

  1. 1. Why Syrma IPO?

    The initial public offer (IPO) of Syrma SGS Technology Ltd offers an early investment opportunity in Syrma SGS Technology Ltd. A stock market investor can buy Syrma IPO shares by applying in IPO before Syrma SGS Technology Ltd shares get listed at the stock exchanges. An investor could invest in Syrma IPO for short term listing gain or a long term.

  2. 3. Syrma IPO what should investors do?

    Syrma IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Syrma IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  3. 4. Is Syrma IPO good?

    Our recommendation for Syrma IPO is to subscribe.

  4. 5. Is Syrma IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Syrma IPO.

  5. 6. When will Syrma IPO allotment status?

    The Syrma IPO allotment status will be available on or around August 23, 2022. The allotted shares will be credited in demat account by August 25, 2022. Visit Syrma IPO allotment status to check.

  6. 7. When will Syrma IPO list?

    The Syrma IPO will list on Friday, August 26, 2022, at BSE, NSE.