Arham Technologies
Arham Technologies is coming out with an initial public offering (IPO) of 22,80,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 42 per equity share.
The issue will open for subscription on December 5, 2022 and will close on December 7, 2022.
The shares will be listed on NSE Emerge Platform.
The share is priced 4.20 times higher to its face value of Rs 10.
Book running lead manager to the issue is Finshore Management Services.
Compliance Officer for the issue is Pooja Avinash Gandhewar.
Profile of the company
Arham Technologies is engaged in manufacturing of LED Smart Televisions, with different screen sizes under its brand ‘STARSHINE’. It also manufactures Fans, Air Coolers and Mixer Grinders through third party manufacturers under its brand ‘STARSHINE’. It has network of dealers and distributors across Chhattisgarh, Madhya Pradesh, Odisha, Vidarbha, Andhra Pradesh and parts of Uttar Pradesh.
The company also serves under Original Equipment Manufacturer (OEM) business models for LED Televisions. Under the OEM model, it manufactures and supply products as per the requirements of its customers, who then further distribute these products under their own brands. With primary focus on quality, it has been catering to a number of regional brands in Central India. With serving Original Equipment Manufacturer (OEM), it has adopted a cost-effective pricing strategy which gives the clients an upper hand over other brands.
The company plans to add other products in its portfolio by way of white labelling, to be a part of bigger portfolio of products. However, it plans to keep its focus on sales of Smart Televisions by making schemes and offers centric to Televisions. It is also setting up a manufacturing facility for Fans at its existing locations which shall give better margin and control in supply chain, as it does not have to depend on other manufacturers for procurement. It is strategically located in Electronic Manufacturing Cluster, in new Smart City of Raipur, which is one of the very first smart cities of India. Chhattisgarh borders seven states i.e. Odisha, Andhra Pradesh, Telangana, Maharashtra, Madhya Pradesh Uttar Pradesh and Jharkhand which gives direct market access to these states. Inland port, also gives an advantage to the location, which brings down cost of import and exports as compared to busy ports like Nhava Sheva etc. Being located in central part of India, it enjoys many geographical advantages.
Proceed is being used for:
Meeting the working capital requirements.
Meeting the Issue Expenses.
General Corporate Purposes.
Industry overview
The Indian consumer durables market is broadly segregated into urban and rural markets and is attracting marketers from across the world. The sector comprises of a huge middle class, relatively large affluent class and a small economically disadvantaged class. Global corporations view India as one of the key markets from where future growth is likely to emerge. The growth in India’s consumer market would be primarily driven by a favorable population composition and increasing disposable income Indian appliances and consumer electronics industry stood at $ 9.84 billion in 2021, and is expected to more than double to reach Rs. 1.48 lakh crore ($ 21.18 billion) by 2025. Electronics hardware production in the country stood at $ 63.39 billion in 2021. In FY20, TV penetration in India stood at 69%, driven by the DTH market. The total active DTH subscriber base stood at 68.52 million in December 2021. As of 2021, the refrigerator, washing machines and air conditioner market in India were estimated at around $ 3.82 billion, $ 8.43 billion and $ 3.84 billion, respectively.
The market size of air conditioners is expected to grow to 165 lakh units by 2025 from 65 lakh units in 2019, while refrigerator’s market size is expected to grow to 275 lakh units by 2025 from 145 lakh units in 2019. According to India Cellular & Electronics Association (ICEA), India has the potential to achieve a value of $ 100 billion in manufacturing of laptops and tablets by 2025. According to Department for Promotion of Industry and Internal Trade, between April 2020-March 2021 (FY21), exports of electronic goods from India stood at $ 11.1 billion. In May 2022, $ 1.34 billion worth of electronic goods were exported. Between April 2000-March 2022, electronic goods attracted FDI inflows of $ 3.58 billion. Indian appliance and consumer electronics (ACE) market is expected to increase at 9% CAGR to reach Rs. 3.15 trillion ($ 48.37 billion) in 2022. Demand growth is likely to accelerate with rising disposable income and easy access to credit. Increasing electrification of rural areas and wide usability of online sales would also aid growth in demand. The government anticipates that the Indian electronics manufacturing sector will reach $ 300 billion (Rs. 22.5 lakh crore) by 2024–25.
Pros and strengths
Smooth flow of operations & Strong customer relationship: The company has established and will continue to focus on strengthening its long-standing relationships with well-known customers across product verticals. It views these customers as its partners and seeks to provide them with quality end-to-end product solutions. Its customers are long term reputed players in the industry. Its relationships with them have enabled it to continuously develop, diversify and improve its product portfolio, plan its production in anticipation of demand from retail customers and ensure continuous focus on quality. Such long-term business relationships stem from its commitment to quality products and timely delivery of customers’ orders under tight delivery schedules and short production lead time. It has maintained good relationship with its major customers. It is successful in building a strong client base for its business.
Well-defined organizational structure: The company has a qualified and experienced management that has decision making powers. It is expected to benefit from the management’s ability to ensure smooth flow of operations. The company is managed by a team of competent personnel having knowledge of core aspects of its Business. Its senior management has pioneered its growth and fostered a culture of innovation, entrepreneurship and teamwork within its organization. A motivated and empowered employee base is key to its competitive advantage. Its personnel policies are aimed towards recruiting talented employees and facilitating their integration into its organization and encouraging the development of their skills and expertise.
Infrastructure and Integrated Manufacturing Facility: The company’s aim is to continuously earn customer's trust and confidence through personal attention, and hence the output of the product as per customer requirement is the foremost thing which shall be considered and attended through technology mode. In providing quality products to its customers, which is facilitated in its fully integrated and self-reliant manufacturing facility. It is devoted to quality assurance. The quality checks ensure that no defective products reached the customer and ensure reduced process rejection. Its quality products have earned it a goodwill from its customers, which has resulted in customer retention and order repetition also new addition to the customer base.
Risks and concerns
Highly dependent on the sale of LED TVs: The sale of LED TVs (Starshine Brand) is the largest contributor to the total revenue and contributes as much as 73.94%, 69.14 %, 91.23 %, and 93.79% to the company’s revenue from operations in September 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively. As a result, the business of the company is exposed to risks related to product concentration. Company’s inability to produce sufficient quantities of the existing products offered to its customers in a timely manner or at all, or the company’s failure to develop new products that meet the evolving demands of end consumers or to obtain the regulatory approvals for such products, the development of successful products by its competitors and general economic conditions. In addition, the business, financial condition, results of operations and prospects could be materially and adversely affected if one or more of these uncertainties or disruptions occur.
Dependence on third-party services: The present operations of the company are significantly dependent of third party for procurement of various consumer electronic equipment like Fans, Air Cooler, Mixer Grinders and Washing Machines. These goods are originally produced by a third party manufacturer and are sold by the company under its name. The company cannot assure its investors that it will be able to obtain access to preferred third-party services for its supply/sale requirements, or at attractive rates or that these services will have adequate available capacity to meet the inventory needs or be able to meet the requirements in a timely manner. Further, if the company is unable to procure the services of third-party capable of sufficiently scaling up operations in response to increased demand from customers, the company might be compelled to make capital expenditures or seek out costlier or lower quality third-party service to meet the requirements.
Faces competition: The market for consumer electronic appliances industry is competitive on account of both the organized and unorganized players. The Market players in this industry generally compete with each other on key attributes such as timely delivery, pricing, the quality etc. Some of the competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster in changing market scenario and remain competitive. Moreover the unorganized sector offers their products at highly competitive prices which may not be matched by the company and consequently affect the volume of sales and growth prospects of the company.
Outlook
Incorporated in 2013, Arham Technologies is engaged in manufacturing of LED Smart Televisions. The company manufactures LED Televisions with different screen sizes under the brand 'STARSHINE'. The company also manufactures Fans, Air Coolers and Mixer Grinders through third-party manufacturers. Arham Technologies Limited serve under Original Equipment Manufacturer (OEM) business models for LED Televisions. The company manufactures and supplies products as per the requirements of the customers, who then further distribute these products under their brands. It is strategically located in Electronic Manufacturing Cluster, in new Smart City of Raipur, which is one of the very first smart cities of India. The company has a qualified and experienced management that has decision making powers. It is expected to benefit from the management’s ability to ensure smooth flow of operations. On the concern side, the company requires certain statutory and regulatory approvals, licenses, registrations and permissions, and applications need to be made at the appropriate stages for the business to operate. Besides, the company may encounter problems in executing the orders in relation to the products offered, or executing it on a timely basis. This situation may arise due to certain factors like power supply, bad weather conditions, an insufficient supply of raw material etc.
The company is coming out with an IPO of 22,80,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 42 per equity share to mobilize Rs 9.58 crore. On performance front, during the FY 2021-22 the revenue from operation and other income of the company has been increased to Rs 3727.37 lakh as against Rs 2280.11 lakh in the FY 2020-21. The restated Profit after Tax for FY 2021-22 has been increased to Rs 302.01 lakh as against Rs 203.76 lakh in the FY 2020-21. Meanwhile, the company is planning soon to expand to Uttar Pradesh, Bihar, Jharkhand, Maharashtra, Telangana, Andhra Pradesh, Rajasthan, Gujrat and then others parts of the Country. It 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 R&D team has the ability to add new features to existing products and develop new product lines and components.
