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Syrma SGS Technology IPO: 5 Things to Know

Aug 9, 2022

Syrma SGS Technology IPO: 5 Things to Know

In 2021, IPOs turned out to be investors' best friend. I remember people all around me talking on and on about how IPOs are a must when it comes to investing and how they offer quick gains.

2021 was indeed a historic year for IPOs. 63 companies came out with their IPOs and raised around Rs 1 tn from the Indian markets. This is the highest ever amount raised in a single year.

However, things changed in 2022. The stock market took a hit and so did the primary market.

In the past 80 days, none of the companies came out with their IPOs. Even the ones which have received regulatory approval have shied away and are waiting for the stock markets to stabilise.

But now, after a prolonged wait, one company is coming out with its IPO this week.

Engineering and design company Syrma SGS Tech will open its IPO on 12 August. Here are the key details of the IPO.

Issue period: 12 August 2022 to 18 August 2022

Issue size: Rs 8,410 m (fresh issue worth Rs 7,660 m and offer for sale worth Rs 750 m)

Price band: Rs 209 to Rs 220 per equity share

Bid lot: 68 shares and multiple thereof

Application limit: Minimum one lot maximum thirteen lots

Face value: Rs 10 per equity share

GMP: Rs 30

Objects of the issue: The company intends to use the funds raised for multiple purposes such as:

  • Funding capital expenditure requirements for the development of an R&D facility and expansion / setting up of manufacturing facilities.
  • Funding our long-term working capital requirements
  • General corporate purposes

The size of the fresh allotment offer has been reduced as the company has made a pre-IPO placement of Rs 1,100 m.

The company has reserved 50% shares of the offer for qualified institutional buyers (QIB). It has reserved 15% for high net worth individuals (HNI). Hence 35% of shares are available for retail individual investors.

Tentative IPO allotment date: 23 August 2022

Tentative listing date: 26 August 2022

For more details, check out all you need to know about Syrma SGS Tech IPO.

Read to know 5 important things about Syrma SGS Technology IPO before you apply.

#1 About the company

Incorporated in 2004 in Chennai, Syrma SGS Technology is an engineering and design company engaged in electronics manufacturing.

It provides services to original equipment manufacturers (OEM). Right from designing the product to volume production, Syrma SGS Technology offers all kinds of services.

It operates in multiple segments including industrial appliances, automotive, healthcare, consumer products, and IT industries.

#2 Financial position of the company

Syrma SGS Technology had good revenues even in the Covid-19 period. The sales are increasing at a steady pace.

However, the decreasing net profit margin raises red flags. The basic EPS is also reducing.

Here's a table showing the financial snapshot of Syrma SGS Tech.

Financial snapshot of the company

Particulars 31-Mar-22 31-Mar-21 31-Mar-20
Revenues (Rs m) 6,545.1 4,444.8 4,048.8
Revenue Growth (%) 47 10  
Expenditure Before Tax 6,066.1 4,081.4 3,470.5
% of Total Income 92.7 91.8 85.7
Net Profit 306.1 286.2 438.8
Net Profit Margin (%) 4.7 6.4 10.8
Basic Earnings per share (Rs) 2.7 3.3 6.2
Data Source: Company's Red Herring Prospectus (RHP)

#3 Peer comparison

Dixon Technologies and Amber Enterprises are the listed peers of the company.

Comparative Analysis

Company Total Income (2022) (Rs m) Operating Profit Net Profit EPS (Basic) (Rs) Return on Net Worth (%) NAV per equity share (Rs)
Syrma Technology 6,545.1 306.1 609.9 5.3 13.6 28
Dixon Technologies 64,497.5 3,881.2 1,903.9 32.3 21.9 125.9
Amber Enterprises 30,636.2 3,100.0 1,113.2 32.4 6.5 486.9
Data Source: Company's Red Herring Prospectus (RHP)

#4 Arguments in favour of the business

Syrma SGS Technology aims for the future of electronics systems, design, and manufacturing through innovation and technology.

They have a strong track record of technical innovation developed by working closely with customer's engineering teams. They provide integrated services and solutions to OEMs, from initial product concept to volume production.

The sales of Syrma SGS Technology have grown significantly even in the pandemic. This shows the company's ability to earn revenues even in uncertain times.

According to red herring prospectus, promoters hold 61.47% stake in the company. It means that the promoters expect the company to do well. It is a sign of trust.

#5 Risk factors

  • Syrma SGS Technology does not have any long-term contracts with its customers. In nutshell, there is no secure source of revenue.
  • It is involved in the IT sector. The IT sector is constantly developing and evolving. In this market innovation is the key. If the company fails to identify a trend, it will be washed away in the constantly updating market.
  • Syrma SGS Technology has huge costs. Expenses account for almost 90% of income. Hence a marginal rise in revenues will always be washed off by expenses.
  • The financial year 2021 was good but in 2022 the figures show a decline. Hence, the financials do not paint a clear picture of how the company is performing over the years.

To conclude

Syrma SGS Technology has been running in profits for the past three years. The debt levels are also decreasing.

However, on the negative side, the declining net profit margin raises a question about the future profitability of the company.

IPOs are back after a long time, but is it worth investing in? An investor will have to carefully look into that.

If the company does well, we may expect more IPOs to open soon.

Considering the volatility of 2022, it would not be an exaggeration to say that no matter how strong, how popular, or how fundamentally strong the company, all have been knocked out clean by the punch of the global downfall.

Amid this, will a new company survive? Only time will tell.

Stay tuned to get further updates on this IPO and all upcoming IPOs in the market.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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