IKIO Lighting IPO: Should You Subscribe The Issue Opening On Tuesday?

IKIO Lighting Limited, an Indian manufacturer of lighting solutions, was established in 2016. The subscription period for the IKIO Lighting IPO will begin on Tuesday, June 6, run for three days, and end on Thursday, June 8. Investors can bid for a minimum of 52 shares in one lot comprising the minimum subscription amount of Rs 14,820 for retail investors. The issue price of IKIO Lighting IPO is fixed between Rs 270-285 per equity share. At the upper end of the pricing range, the company aims to raise around Rs 607 crore through the IPO, primarily consists of a fresh issue of equity shares worth up to Rs 350 crore and an offer for sale (OFS) of up to 90 lakh shares.

According to grey market watchers, the grey market premium (GMP) stands at Rs 95 prior to subscription. According to the June 5 GMP of Rs 95 and the upper price band of Rs 285, the expected listing price for Ikio Lighting shares is expected to be Rs 380 per share. As a result, the listing premium has a healthy upside of 33.33% based on the most recent GMP.

Qualified institutional buyers (QIB) may purchase up to 50% of the issue, while retail investors may purchase up to 35% and non-institutional investors may purchase up to 15%. Under the offer for sale (OFS) of up to 90 lakh shares, promoters Hardeep Singh will offload 60 lakh shares and Surmeet Kaur will offload around 30 lakh shares. The IKIO Lighting IPO listing date is Friday, 16 June 2023 and the company will be listed on BSE, NSE.

7 Things To Know About IKIO Lighting IPO

According to Krishna Raghavan, Founder, UnlistedKart, here are the 7 key facts of IKIO Lighting IPO.

About the Company:

IKIO Lighting Ltd (ILL) is a manufacturer of light-emitting diode (LED) lighting products based in India. The company provides low-energy LED products to assist India in meeting its sustainability targets. The company is largely an original design manufacturer (ODM), designing, developing, manufacturing, and supplying products to customers who then resell them under their own names. ILL also collaborates with customers to develop, manufacture, and supply products designed by them.

Expanding Product Portfolio:

IKIO Lighting's product portfolio encompasses LED lighting, refrigeration lights, ABS piping, and various other offerings. As an Original Design Manufacturer (ODM), the company designs, develops, manufactures, and supplies products to customers, who then distribute them under their own brands. This collaborative approach allows IKIO Lighting to cater to the distinct requirements and expectations of its customers.

Focused on the Premium Segment:

IKIO Lighting places a strong emphasis on the premium LED lighting segment. Its offerings include lighting, fittings, fixtures, accessories, and components, all designed to meet the highest quality standards. By targeting the premium market, the company positions itself as a provider of cutting-edge LED lighting solutions that offer superior performance and efficiency.

Steady Financial Performance:

The financial performance of IKIO Lighting Limited has been commendable. In the preceding financial years 2022, 2021, and 2020, the company achieved revenues of 334 crores, 214.57 crores and 221.83 crores, respectively. LED lighting contributes significantly to the company's revenue, accounting for 91% of its operations, while refrigerator lights make up approximately 2%.

IPO Details and Allocation:

IKIO Lighting's IPO, with a price band of Rs 270-285 per equity share, consists of a fresh equity issue of up to Rs 350 crore and an offer for sale (OFS) of up to 90 lakh shares. The allocation of the offer reserves 50% for qualified institutional buyers (QIBs), 35% for retail investors, and 15% for non-institutional investors. The IPO opens on June 6, 2023, and is expected to be listed on June 16, 2023.

Utilization of Funds:

The net proceeds from the public offer will be used for several purposes, including the repayment or prepayment of certain borrowings, investment in the subsidiary IKIO Solutions for setting up a new facility in Noida, and general corporate purposes. This strategic allocation demonstrates IKIO Lighting's commitment to enhancing its operational capabilities and expanding its market reach.

Positive Valuation and Outlook:

When evaluating the valuation of the IKIO Lighting IPO, the issue appears attractively priced. With a price-to-earnings (P/E) ratio of around 32.2x and a price-to-book value (P/BV) ratio of 4.80x (based on post-IPO NAV), the issue presents a compelling investment opportunity. Comparisons with similar companies in the electronic manufacturing sector, such as Dixon and Amber, suggest that IKIO Lighting's IPO offers a more favorable valuation with superior margins and return ratios.

Should you subscribe IKIO Lighting IPO?

Commenting on whether one subscribe IKIO Lighting IPO, Nanavath Bhupal Naik, MD , Shares Bazaar said "The company operates in the LED lighting solutions sector and has demonstrated steady financial performance with consistent revenue growth and increasing net profits over the past three fiscal years. The IPO is attractively priced with a lower valuation compared to comparable companies in the market, offering superior margins and return ratios. Additionally, IKIO Lighting has a strong track record of customer retention and is expanding its international customer base. With the funds raised from the IPO, the company aims to repay borrowings, invest in subsidiary expansion, and support general corporate purposes. Considering these factors, we believe that the IPO offers a promising long-term prospect for investors"

Krishna Raghavan, Founder, UnlistedKart said "IKIO Lighting's upcoming IPO marks a significant milestone in the company's journey to becoming a leading player in India's LED lighting industry. With a focus on sustainability, premium offerings, and a strong financial track record, IKIO Lighting is well-positioned to capitalize on the growing demand for energy-efficient lighting solutions. Investors seeking long-term prospects in the lighting sector should consider subscribing to the IKIO Lighting IPO, as it offers the potential for substantial returns while contributing to a greener and more sustainable future."

A R Ramachandran, Co-founder & Trainer-Tips2trades said "Even though return ratios and consistent profit growth make IKIO Lighting a good buy, Investors should also be wary of its high debt-equity ratio. Considering current valuations are reasonable, investors can subscribe to this issue for listing gains."