Kaynes Technology IPO fully subscribed by 1.10 times on Day 2. Should you bid on last day?

According to BSE data, Kaynes IPO received cumulative bids of 1,14,70,150 equity shares on Day 2 compared to the offered size of 1,04,70,246 equity shares — registering in a subscription of 1.10 times.

Further, the data revealed that the portion reserved for QIBs fully subscribed by 2.45 times, while the portion kept for employees received subscriptions to the tune of 3.22 times. However, the portion reserved for non-institutional investors (NIIs) and retail individuals only subscribed by 77% and 87% respectively.

The IPO was launched on November 10 and will close on November 14. Bidding will not be allowed on November 12 and 13th due to the weekend holiday.

The price band for the IPO is set at ₹559 apiece and ₹587 apiece respectively. The IPO includes a fresh issue of ₹530 crore and an offer for sale (OFS) of around ₹328 crore.

The company plans to use the proceeds from the fresh issue for repayment of the debt, funding CAPEX, working capital and investment in subsidiaries, and general corporate purposes.

After the IPO, Kaynes equity shares will be listed on BSE and NSE.

According to IPO watch, Kaynes IPO’s grey market premium is around ₹75 per share —- sharply higher from ₹15 per share on Thursday. This indicates a probable listing of ₹662 per share (upper price band of ₹587 per share + ₹75). It needs to be noted that grey market premium changes on a daily basis and hence the speculation for listing price also changes accordingly. In general terms, GMP price usually indicates the price level an investor is willing to buy for a company’s shares and gives an idea of potential future performances. However, the grey market is not regulated by Sebi.

With over three decades of experience, Kaynes Technology is a leading end-to-end and IoT solutions-enabled integrated electronics manufacturing player, having capabilities across the entire spectrum of electronics system design and manufacturing (“ESDM”) services. It would be among the first companies in India to offer design-led electronics manufacturing to original equipment manufacturers (“OEMs”) using our mature embedded design capabilities.

What do analysts say about Kaynes IPO?

According to Anand Rathi report, on the valuation front at the upper band of the IPO price Kaynes is demanding PE of 81.9x its TTM earnings attributable to post-issue equity demanding a market cap of ₹34,129 million “which we believe is fairly priced considering its decent historical growth, strong revenue visibility and growing demand of automation across underlying industries.”

Further, in its report, Reliance Securities said, “based on the FY22 earnings, the company is valued at 82x P/E, 38x EV/EBITDA, and 5x EV/ Sales. The company is IoT solutions enabled with end-to-end capabilities across the ESDM spectrum. The company aims to implement comprehensive backward integration measures by manufacturing in-house components and get into deep competencies in design of integrated circuits and chip sets. In view of strong financials, diversified business model, long-standing relationships with marquee customers, global certifications, strong supply chain, and sourcing networks, we recommend ‘SUBSCRIBE’ to the issue.”

In its report, ICICI Direct stated that Kaynes has capabilities across the entire spectrum of ESDM services. Its products find application in various end-use industries. Consolidated revenue grew at a CAGR of 38.5% in FY20-22, driven by higher YoY revenue growth across segments. The EBITDA margin increased ~355 bps YoY to 13.3% led by higher topline growth and significant improvement in gross margin. PAT came in at ₹42 crore, up 331% YoY on account of strong revenue growth and improvement in margins. At the upper price band at ₹587, the stock is priced at ~82x at FY22 EPS of ₹7.2/share (based on fully diluted post-issue of equity).

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.