Akash Sethia, Head of Strategy, Elin Electronics Limited

21 Dec 2022 , 12:05 PM

Why should retail investors invest in this IPO?

We enjoy leadership in key categories where we operate, have built long standing relationships with marquee customers, have maintained consistent financial performance, are known for quality manufacturing, have a high degree of manufacturing expertise with backward integration enabling us to keep a strong focus on ‘cost, quality, delivery’.

Part of the IPO proceeds will be used to repay debt. Will the company become debt-free after this repayment?

Post IPO, Elin is expected to be debt free. 

Run us through the company’s expansion plans.

While each of the business segments represents an exciting opportunity, we feel 3 segments stand out in terms of growth potential:

–              Fans

–              Small Appliances, especially beauty, male grooming and personal care segment

–              FHP Motors

We have plans to launch new sub-categories and acquire new customers within each of the above segments.

Share with us the key macro opportunities for your company across all key markets.

Key trends acting us tailwinds for us include:

• Brands looking to outsource production to specialist manufacturing companies such as Elin and focusing their time and efforts on marketing and sales
• China +1 strategy is playing out for both economic reasons (wages rising in China, India becoming cost competitive due to scale and lower wages) and geopolitical reasons (uncertainly of policy, etc.)
• Massive thrust on Make in India and localization of production

What is the company’s growth strategy?

Key strategies for growth are:

• Expand ODM business
• Cross sell to customers that have presence across segments (e.g.: to our fan motor customer, cross sell and up sell finished fan also)
• Achieve higher degree of backward integration in manufacturing
• Continue to focus on R&D and core competence of sheet metal, plastic moulding, R&D, tool room etc.
• Expand medical segment which has high growth potential as well as high margin

What are the key challenges facing the company? How is the company mitigating them?

We have been able to successfully get down concentration from Top 5 customers from ~70 -75% in FY19/20 to ~63 – 65% in FY22.

Our operations are typically labor intensive in nature. Using appropriate degree of automation and having employee friendly practices, we have had ensured that there are no instances of labor unrest.

What are the margin drivers of the company?

We have a strong philosophy of focusing on margins. The Bill of Material (BOM) is to the account of customer and we work on a value add % basis. All price fluctuations are passed on, albeit with a time lag of a month/quarter.

Key margin drivers are as follows:

• Expansion of ODM business, which offers a 1-1.5% better margin profile (currently, ODM is ~10% of total revenue of company which we aspire to take to ~25% in a few years)
• Focus on expanding relatively higher margin segments especially FHP motors, medical segment, BLDC fans etc.

Give us an overview of the ESG strategy and performance of the company.

Our customers are large corporates both within and outside India (MNCs) with a strong focus on sustainability and ESG. We regularly undergo audits for the same. We have 100% track record of all compliance. We have waste-water treatment plants to treat toxic water which we use for gardening post treatment. We use a natural gas based generator (versus diesel generator) at our largest facility in Ghaziabad.