Vinyas Innovative Technologies coming with IPO to raise upto Rs 54.66 crore

Vinyas Innovative Technologies

• Vinyas Innovative Technologies is coming out with an initial public offering (IPO) of 33,12,800 shares of Rs 10 each in a price band Rs 162-165 per equity share. 
• The issue will open for subscription on September 27, 2023 and will close on October 3, 2023.
• The shares will be listed on NSE Emerge.
• The face value of the share is Rs 10 and is priced 16.20 times of its face value on the lower side and 16.50 times on the higher side.
• Book running lead manager to the issue is Sarthi Capital Advisors.
• Compliance Officer for the issue is Subodh M R.

Profile of the company

Vinyas Innovative Technologies is a provider of design, engineering and electronics manufacturing services catering to global Original Equipment Manufacturers and Original Design Manufacturers in Electronic Industry. As an integrated electronic manufacturing services provider, the company offers a broad range of products and services across multiple industry segments for about 20 years. With wide industry knowledge, cutting-edge technologies & state-of-the-art infrastructure, Vinyas supports its Global partners from conceptualizing the design, engineering, manufacturing to turnkey requirements for mission-critical applications.

It leverages the design capabilities of with over three decades of domain expertise providing engineering and design solutions globally with a focus on multiple industries. Its Electronic Manufacturing Services are provided as Build to Print (B2P) and Build to Specification (B2S) services to its clients. Its B2P solutions involve its client providing the design for the product for which it provides agile and flexible manufacturing services. Its B2S services involve utilising its design capabilities to design the relevant product based on the specifications provided by the client and manufacturing the product. Its solutions primarily comprise: (i) printed circuit board (PCB) assembly (PCBA), and (ii) box builds which are used in safety critical systems such as cockpits, inflight systems, landing systems and medical diagnostic equipment. 

Proceed is being used for:

• Working capital requirements of the company
• General corporate purposes
• Meeting issue expenses

Industry overview

India has the second largest armed force in the world, and is considered the seventh largest aerospace and defence (A&D) market globally with a sizeable budget to cover the needs of the country’s Army, Navy and Air Force. The large scale modernization of the defence forces and the drive to manufacture locally have become focus areas of the government. Emerging technologies are going to reshape modern day warfare, and will harness the power of electronics to do so. This will make the Indian strategic electronics (SE) sector, mainly comprising aerospace and defence, a vibrant industry over the next decade.

India’s defence manufacturing sector has been witnessing a CAGR of 3.9% between 2016 and 2020. The Indian government has set the defence production target at $25.00 billion by 2025 (including $5 billion from exports by 2025). Defence exports in India were estimated to be at $1.29 billion in 2019-20. India’s defence import value stood at US$ 463 million for FY20 and is expected to be at $469.5 million in FY21. Defence exports in the country witnessed strong growth in the last two years. India targets to export military hardware worth $5 billion (Rs 35,000 crore) in the next 5 years. As of 2019, India ranked 19th in the list of top defence exporters in the world by exporting defence products to 42 countries. 

The Growth in demand for electronics in Indian Aerospace & Defence is driven by modernization of weapon platforms, introduction of state-of-art weapons by the three armed forces, impact of indigenization and Make in India initiative. The demand pool is highly dispersed emanating from more than 45 individual entities operating through more than 100 institutions. It is primarily led by Ministry of Defence, Ministry of Home Affairs & Civil Avionics. Strategic electronics market size in India is expected to be around $6 billion in 2019 and based on already classified plans and orders across various programs, it is estimated to grow at a CAGR of 7% to reach $15 billion by 2032. Civil avionics which has traditionally been untouched by Indian players is expected to generate demand worth USD 10 bn over the next 12 years. 

Pros and strengths

Technology enabled and scalable end-to-end capabilities: Its system integration services are a part of an array of electronic, electro-mechanical and PCB assemblies, and full-system integration services, which can be configured as per its customers’ requirements. As part of its system integration services, it also does in-house testing to ensure the quality of its final products, and reliability of its products’ functioning under varying environmental conditions. It also specialises in manufacturing products that are used in applications for Medical, Telecom, Automotive and Industrial segment. It possess the skillset and technology to manufacture PCBA according to customer requirements. In addition, its products are also subjected to various quality assurance tests.

Market leadership position: The Company has a strong market leadership position in the Aerospace, Defence & other Electronic segment in the industry. It has helped the company to rapidly scale new products successes. Achieving market leadership in the ESDM industry requires a combination of factors such as innovation, quality, customer service, competitive pricing and effective marketing.

Strong Market recognition: The Company being into the field for more than 2 decades and a strong Promoter having experience of more than 3 decades, have strong Market recognition in the ESDM industry. This has enabled the company to be a premium player compared to its competitors in ESDM industry. In the ESDM industry, strong market recognition refers to a company's ability to establish a strong brand reputation and customer loyalty in the market. This recognition is achieved through various factors such as product quality, innovation, reliability, customer service, and effective marketing.

Risks and concerns

Significant working capital requirements: Its business requires significant working capital including in connection with its manufacturing operations, financing its inventory, purchase of raw materials and its development of new products which may be adversely affected by changes in terms of credit and payment. It is required to maintain a high level of working capital because its business activities are characterised by long product development periods and production cycles. Even where milestone payments are allowed, these have to be backed by bank guarantees. Delays in payment under on-going contracts or reduction of advance payments due to lower order intake or inventory and work in progress increases and/or accelerated payments to suppliers, could adversely affect its working capital, lower its cash flows and materially increase the amount of working capital to be funded through external debt financings. 

Operate in competitive business environment: The manufacturing of products and solutions is competitive and it experiences rapid technological developments and changes in customer requirements. Its ability to meet the qualification criteria in its various business areas is critical to being considered for any project. It competes on the basis of its ability to fulfil its contractual obligations including the quality of products and the timely delivery of the products. 

Maximum revenue generated from defence & aerospace contracts: A significant portion of its revenue from operations are generated from the defence & aerospace contracts. In Fiscal 2021, 2022 and 2023, its revenue from the offset defence contracts was 74.83%, 86.57% and 82.31% of its total revenue from sale of products and services, respectively in such periods. It expects to continue to derive most of its revenue from operations from work performed under such offset contracts. Any changes in the government policy in connection with offset defence contracts could have an adverse impact on its sales, earnings and cash flows.

Outlook

The company is engaged in providing design, engineering and electronics manufacturing services in the Defence and Aerospace, Medical, Consumer, Automotive, Telecommunication and Industrial domain. With 100% in-house design and manufacturing capability. On the concern side, its business requires significant working capital including in connection with its manufacturing operations, financing its inventory, purchase of raw materials and its development of new products which may be adversely affected by changes in terms of credit and payment.

The issue has been offered in a price band of Rs 162-165 per equity share. The aggregate size of the offer is Rs 53.67 crore to Rs 54.66 crore based on lower and upper price band respectively. On performance front, the total revenue increased by 12.58% from Rs 212.16 crore in the fiscal year ended March 31, 2022 to Rs. 238.85 crore in the fiscal year ended March 31, 2023. The revenue has increased majorly by increase in revenue from sales of product from Rs 196.70 crore in the fiscal year ended March 31, 2022 to Rs. 216.77 crore in the fiscal year ended March 31, 2023. The Net Profit has increased by 627.91% from profit of Rs 1.01 crore in the fiscal year ended March 31, 2022 to Rs 7.34 crore in the fiscal year ended March 31, 2023. Meanwhile, it intends to collaborate with OEMs in India, Israel and United States that possess high-end technologies in areas such as radars, electronic warfare, missile systems, sensors and communication systems. Another driver of defence electronics and associated integration opportunities in India is the proliferation of more advanced intelligence, surveillance and reconnaissance solutions and in particular, radar systems. Several Indian combat aircraft continue to use passive radar solutions.