Sandeep Tandon, Executive Chairman, Syrma SGS Technology

16 Dec 2022 , 11:49 PM

 

Run us through the company’s business model

Syrma SGS is one of the leading Electronics system design and manufacturing (ESDM) companies focusing on technology-based solutions and Original Design Manufacturing (ODM) business. Unlike the traditional Original equipment manufacturer (OEM) or ODM business model, which only focuses on certain stages of the production process. The company’s business model starts from product concept design and focuses on every segment of the overall industry value chain. Our Company’s business approach leads to continuous advancements in product technology, structure, and functional design to meet customer requirements and lead the industry in development. The company believes that its business model gives a competitive advantage at the front-end of the industry value chain which makes a value-creator and it enables to become a driving force for developing new products and break-through technologies.

What are the company’s key strengths?

Syrma SGS is recognized as a “leader in people development” as the company is considered as one of the great places to work. Our key focus is on women’s empowerment as well and this attributes to the fact that we have more than 80% of women as a part of the employee base. We also share a first mover advantage as we were the first company in India to manufacture Radio frequency identification (RFID) products and continue to lead the industry. Also, our company is recognized as a leader in memory modules with deep expertise. Our Company has a long-standing relationship with customers, an opportunity for increased wallet share and not a single customer more than 5%.

Share with us your growth strategy

Our growth strategy involves solidifying and strengthening our core competitiveness of technology innovation, pursuing organic growth, and inorganic growth through strategic acquisitions, expanding our customer base and geographic reach, increasing our wallet share from existing customers, and catering to more end-use industries. Such a growth strategy will place significant demands on our management as well as our financial, accounting, and operating systems and require us to continuously evolve and improve our operational, financial, and internal controls across our organization.

We believe that our experience, track record, and conservative approach to identifying and implementing our inorganic growth strategy will enable us to acquire and successfully integrate new businesses.

What are the macro-opportunities for your company?

One of the key reasons for the anticipated growth of Indian economy is the country’s focus on the manufacturing sector. Indian manufacturing sector’s contribution has increased from 16 % to over 18 % in the past 10 years buoyed by initiatives like the “Make in India” and sector-specific initiatives to various manufacturing companies that aim to make India a global manufacturing destination. Similarly, the Government of India has also introduced the Production Linked Incentives (PLI) scheme for large-scale electronics manufacturing. The scheme proposes PLI to boost domestic manufacturing and attract large investments in — Large Scale Electronics Manufacturing (mobile phones and specified electronic components), IT Hardware (Laptops, Tablets PCs, and Servers), and White Goods (Air Conditioners and LED Lighting) including Assembly, Testing, Marking and Packaging (ATMP) units.

The pandemic has also created a unique growth opportunity for India. Supply chain disruption during the pandemic has forced many countries and organizations to re-think on their sourcing strategy and reduce dependency on one country for the entire supplies. These large companies are now looking for alternate low-cost manufacturing locations in South East Asia and South Asia and India emerges as one of the sought-after investment destinations for many of these organizations. As there would be a re-alignment of the global supply chain in the coming years, India is likely to benefit immensely from these strategic decisions and likely become a manufacturing powerhouse in the coming years. A favorable business environment, liberal FDI norms, constantly improving ‘Ease of Doing Business’ rankings, enormous consumer base and rapidly improving digital infrastructure are some of the key factors that will drive investment in India in the coming years.

North America is a leader in adopting next-generation technologies and devices. For instance, the USA is one of the first countries to start the commercialization of 5G. On the device front, the demand for IoT-based devices is expected to accelerate at a CAGR of 15.0 % till 2025. In the next five years, demand for EMS will be driven by a rise in electronic device demand, a well-established EMS infrastructure, and evolving government policies that encourage local production. Linking the region’s quantum of R&D activities to the total available market, EMS providers can expect good growth opportunities from product development if EMS providers can solve scalability and time-to-develop challenges.

Also, the EMS providers in the region are looking to diversify the portfolio of end-user verticals to create sustainable growth opportunities. Currently, some EMS firms in the region that rely heavily on the automotive or aerospace and defense (A&D) verticals were significantly impacted in 2020 due to the economic slowdown. From a growth perspective, the presence of leading network equipment OEMs, emerging medical device start-ups, regulations forcing auto OEMs to shift to EVs, reshoring, and upgrading of manufacturing facilities will improve growth prospects for EMS companies in the region.

How will you deploy the funds raised via the IPO?

Our Company proposes to utilize the Net Proceeds from the Fresh Issue towards funding the following objects:

1. Funding capital expenditure requirements for the development of an R&D facility and expansion / setting up of manufacturing facilities
2. Funding our working capital requirements
3. General corporate purposes

Share with us the key challenges facing the company. How are you mitigating the same?

While commissioning any manufacturing facilities in newer territories, we may also encounter various setbacks such as adverse weather conditions, delays in receiving required government approvals, construction defects and delivery failures by suppliers, unexpected delays in obtaining permits and authorizations, or legal actions brought by third parties. Further as and when we commission our planned manufacturing facilities, our raw material requirements and costs as well as our staffing requirements and employee expenses may increase and we may face other challenges in extending our financial and other controls to our new manufacturing facilities as well as in realigning our management and other resources and managing our consequent growth.

Syrma faces competition from both international and local players in respective geographies, product segments or sub-segments in which we operate. Our sales to our customers also depend largely on the number and type of products that we supply to them and our ability to increase the wallet share of our customers. While our customers may implement various cost-cutting strategies, which include restructuring of operations, relocation of production/ procurement to low-cost regions, vendor rationalization, etc., we believe that the criticality of the products we manufacture, our strong customer relationships, lack of alternate vendors, high switching costs, our ability to maintain high quality and delivery commitments and ability to produce a diverse range of products will allow us to meet these business challenges.