Multibagger Semiconductor Stock Invests Rs 500 Crore in New Chip Manufacturing Unit

Automation is propelling the world to new heights, dramatically accelerating tasks that once consumed hours or even days. This transformation is attributed to remarkable technological advancements.

Today, our access to an array of innovations is truly astounding, from foldable smartphones to electric vehicles (EVs), and even supercomputers.

However, these electronic marvels would be rendered inert without a vital component: the semiconductor chip. These minuscule yet indispensable semiconductors underpin the functionality of all electronic devices.

In recent times, the semiconductor sector in India has become a focal point owing to its remarkable growth potential.

As technology relentlessly evolves and digitalization becomes the standard, the demand for semiconductor products has surged.

This surge in demand has not only captivated the attention of investors but also has drawn major industry giants into the Indian semiconductor market. Among the notable entrants is RIR Power Electronics, erstwhile known as Ruttonsha International.

Before delving deeper into RIR Power Electronics plans for this pioneering initiative, here's a brief introduction.

About RIR Power Electronics

RIR Power Electronics was established by Mr. Ruttonsha in technical collaboration with International Rectifier Corporation USA. In 2000, it set up its export oriented unit (EOU).

Today, RIR is a market leader in Power Electronics. It has over 53 years of experience and operations in 10+ countries.

It is the only company in the private sector to manufacture Semiconductor devices right from the diffusion stage.

RIR's product portfolio includes low-power to high-power devices and IGBT Modules that find applications in welding, elevators, battery charges, railways, medical equipment, etc.

The company also manufactures high-current rectifiers that can be used in hydrogenation, electroplating, plasma heating, etc.

RIR Power Electronics' SiC Revolution

RIR Power Electronics received official approval from the government of Odisha on 2 November 2023 for a substantial investment of Rs 5.1 billion (bn).

This investment is earmarked for the establishment of a state-of-the-art facility for the manufacturing, fabrication, and packaging of Silicon Carbide (SiC) devices in Info Valley, Khordha, Odisha.

This initiative signifies a major step forward for RIR Power Electronics and the state of Odisha.

Back in July this year, it was announced that the US-based Silicon Power Group had planned to invest a significant sum of Rs 10 bn about to US$ 121.7 million (m) to set up a cutting-edge facility in the state of Odisha, India.

This facility would be for the production of 150-millimeter silicon carbide, a pivotal semiconductor component. The investment was supposed to be channelled through the group's Indian subsidiary, RIR Power Electronics, to commence operations within the next 18 to 24 months.

Silicon carbide, a vital component used in electric vehicle chips, as well as various applications within the realms of industrial power and energy, was at the heart of this endeavour.

The State-Level Single Window Clearance Authority (SLSWCA) of the Odisha government, in a decisive move, approved a total of 12 investment projects, amounting to a substantial Rs 27.9 bn, of which RIR Power Electronics was one of the beneficiaries.

This substantial investment holds great significance for both RIR Power Electronics and the state of Odisha.

Silicon Carbide (SiC) is recognized as a cutting-edge semiconductor material, offering advantages over traditional silicon semiconductors. These advantages include enhanced power handling capabilities, increased efficiency, and greater durability.

SiC devices have a wide array of applications, particularly in electric vehicles, renewable energy systems, and industrial automation.

The forthcoming facility in Odisha marks a significant milestone for RIR Power Electronics as it represents the company's first manufacturing unit in India.

The company has set its sights on commencing the production of SiC devices at this facility in 2024, with expectations of creating approximately 500 job opportunities.

The government of Odisha has been proactively promoting itself as an attractive destination for semiconductor manufacturing.

This appeal is further bolstered by a skilled workforce, robust infrastructure, and a conducive investment climate that the state offers to semiconductor companies.

India's Semiconductor Push

The semiconductor sector in India has been witnessing substantial growth for the last couple of years. The Modi government's ambitious mission to build the world's largest semiconductor ecosystem in India is conducive to its growth.

The centre announced the ambitious Semicon India Program under the India Semiconductor Mission (ISM) in December 2021 for developing the semiconductors and display manufacturing ecosystem in India. This program has a financial outlay of Rs 760 bn.

In September 2022, this scheme was modified on industry feedback to bolster its competitiveness and relaunched as the Modified Semicon India Programme.

A Rs 760 bn program to promote the development of a sustainable semiconductor and display manufacturing ecosystem in India.

In addition to the Semicon India Programme, the government is launching the Design-led Manufacturing (DLM) Program to promote the design and manufacturing of semiconductors in India.

A Close Look at the Financials

Over the past three years, RIR Power Electronics has demonstrated impressive financial growth. Its revenue has seen a compound annual growth rate (CAGR) of 23.9%, while net profit has shown a growth of 71.3%.

This has been due to an expansion of its margins in the previous years.

The company operates with high profit margins, boasting a net profit margin of 11.7% in FY23.

Financial Snapshot (2021-23)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Revenues (Rs in m)	300.7	423.3	573.3
Revenue Growth (%)	-10	41	35
Net Profit (Rs in m)	13.3	28.2	66.8
Net Profit Margins (%)	4.4	6.7	11.7

Data Source: Equitymaster

Going forward, the company continues to focus on the high-power semiconductor devices business and foresees ample opportunities for growth in Export Markets.

Visicon Power Electronics Pvt, a subsidiary of RIR is setting up a Silicon Carbide (SiC) wafers plant in Halol, Gujarat. The installation of the Epitaxy Reactor is completed and is undergoing trial runs. The plant is expected to start commercial production from Q4FY24 onwards.

Conclusion

The Electronics Manufacturing Services (EMS) sector in India has experienced remarkable growth, buoyed by the rising need for electronic goods.

Government initiatives like 'Make in India', 'Digital India', and Production-Linked Incentive (PLI) schemes have played a pivotal role in promoting domestic manufacturing and creating an attractive investment environment.

Global demand is now shifting from traditional energy sources to alternative, environmentally friendly solutions such as electric vehicles (EVs) and other sustainable electric applications.

This transition has given rise to an increased demand for semiconductors, which are the foundation of all electric-powered applications.

This sets the stage for the company to expand its operations and actively contribute to the development of India's semiconductor ecosystem.

By harnessing this momentum and establishing a robust semiconductor manufacturing hub, India can reduce its reliance on imports, bolster its domestic production capabilities, and stimulate innovation within the semiconductor sector.

While investment opportunities may seem promising, it is prudent to conduct thorough research and due diligence before investing.

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