Chipmaker Polymatech plans ₹1,500 crore IPO by year-end

This public offer will be twice the size of the ₹750 crore initially planned, when the company had filed its draft prospectus with the Securities and Exchange Board of India (Sebi) in October 2023. Back then, the company was considering a listing in April. The company, which manufactures opto-semiconductor chips, also called photonics, is seeking to divest a 10% stake through the IPO.

“We will certainly go for the IPO of about ₹1,500 crore within this year. We’ve informed Sebi that we will be refiling the DRHP with our March or June financials.” The company is in the process of appointing merchant bankers for the sale, he added. 

According to Nandam, several funds have expressed interest in investing in the company, but Polymatech prefers to take the IPO route to return value to its shareholders. 

Promoters, including Nandam, hold around 80% of Polymatech, with 2.6% owned by Nav Capital Emerging Star Fund. According to the 2023 DRHP, there have been several private placements over the past few years, involving individual shareholders.

Polymatech’s revenue nearly doubled from around ₹650 crore in FY23 to ₹1,200 crore in FY24. In FY22, its revenue was at ₹125.87 crore. The company expects to double its revenues every year driven by the anticipated rise in chip demand in the coming years. Besides, it has expanded its chip packaging capacity by 1 billion units in FY24.

“Currently we’re making 2 billion chips a year. We will scale up to 20 billion chips over six years. We recently entered into wafer fabrication and growing ingots. We will be setting up a wafer fab and packaging plants. So, in all, we’re looking at a $5 billion investment over the next few years.” 

Out of the $5 billion, $1.5 billion will be invested from the proceeds of the IPO as well as internal accruals, he said, adding that the company will also be applying for financial incentive schemes offered by central and state governments for semiconductor units. 

The Centre has established a $10-billion fund for the Modified Programme for Semiconductors and Display Fab Ecosystem, offering a 50% financial incentive to companies involved in chip manufacturing or assembly in India. Following the central government’s approval, state governments may extend additional capital subsidies under their respective schemes.

The company currently operates two plants in Tamil Nadu. It is searching for a suitable location, spanning 45-50 acres, to set up a wafer fabrication unit for captive use. 

Earlier this month, the company signed a memorandum of understanding with Japanese precision manufacturing firm Orbray, which will supply sapphire ingot growing technologies, besides training Polymatech’s engineers at its facility in Japan. Sapphire ingots are crystalline structures used as the base material in the production of LEDs.

“We will begin with sapphire, then we will get into silicon carbide and then silicon, to become a multi-wafer company, and will supply to anyone who comes to India, be it wafer, ingots or chips, anything that they may need.”

It is also engaged in advanced discussions with suppliers of silicon carbide wafers and silicon wafer fabrication machinery, seeking to have tie-ups along the lines of the Orbray partnership.

Out of its planned investments of $5 billion over the next 3-4 years, it will allocate $1 billion to set up a 1 million sq ft facility for ingots by the year-end, he said. Another $1 billion may be invested for a local packaging unit, as well as overseas packaging units. “Our company’s vision is to become a fully integrated, end-to-end, semiconductor company.” 

The Chennai-based company designs, manufactures, packages, and assembles semiconductor chips and chip modules for various applications, including medical, agriculture, large-area lighting, PCs, laptops, and cell phone backlights. It also exports to the US, UK and the Middle East.

As of March 2024, Polymatech earned around $146 million from exports, said Nandam. It is also exploring overseas locations for establishing assembly and packaging units, he added. “We’re already in discussions with governments of Bahrain, Singapore and the UK, as well as the US. Officials from the US will be visiting soon.”