EPACK DURABLE LIMITED IPO: ISSUE SIZE, PRICE BAND AND MORE

Amid many SME IPOs, the third mainline IPO that opens for subscription this month is EPACK Durable Limited (EDL). They are Original Design Manufacturer (ODM) of room air conditioners. In this blog, we will cover EDL, which opens for subscription on 19 January and closes on 23 January. Let us look at all the relevant details to help you evaluate the company.

EPACK Durable Limited IPO: Key Details

Below are the key details related to the EDL IPO:

• Issue Size: Rs 640.05 crore
• Price Band: Rs 218 - Rs 230
• Lot Size: 65 Shares
• Issue Details: Fresh Issue of Rs 400 crore, remaining Offer for Sale (OFS)
• Market Cap: At the upper price band, Rs 2,203.37 crore
• Minimum Investment: Rs 14,950

EPACK Durable Limited IPO: The Business

EDL is the second largest room air conditioner original design manufacturer (ODM) in India in terms of number of units (indoor units + outdoor units) manufactured in FY23 through the ODM route.

Their product portfolio currently comprises the following:

Room air conditioners: They design and manufacture complete RACs, comprising (i) window air conditioners (WACs), including window inverter air conditioners, (ii) indoor units (IDUs), and (iii) outdoor units (ODUs, which combined with IDUs form split air conditioners (SACs)) with specifications ranging from 0.75 ton to 2 ton, across a range of energy ratings and types of refrigerants. They also manufacture split inverter air conditioners.

Small domestic appliances: They currently design and manufacture induction cooktops, mixer grinders, and water dispensers.

Components: They manufacture heat exchangers, cross flow fans, axial fans, sheet metal press parts, injection molded components, copper fabricated products, PCBAs, universal motors, and induction coils for captive consumption and are part of their product offerings to their customers.

EPACK Durable Limited IPO: Industry Outlook

A developing Indian economy, greater consumer spending power, and improved access to high-quality items at reasonable prices have transformed India’s consumer durables market. The overall market size of the consumer durables market for FY23 is estimated at Rs 1,303 billion, and the market is expected to grow at a 13.7% CAGR until FY28.

Penetration of Room Air Conditioners (RACs) in Indian households is around 8% in 2022, implying that there is considerable scope for growth. Indian RAC market is highly fragmented, with varied sets of players – global, indigenous, and importers – selling a wide range of products in the market. 

Penetration of RAC is extremely low in India when compared to various developed economies and only one-fifth of the global average RAC penetration. There is tremendous potential in the Indian market, as the overall RAC penetration is relatively low at 8%. Also, RAC penetration is the lowest among consumer durables, compared to washing machines (12%), refrigerators (33%), and televisions (65%).

EPACK Durable Limited IPO: Listed Peers

The company has many listed peers and faces tough competition. Its listed peers are Amber Enterprises India Ltd, PG Electroplast Limited, Dixon Technologies, and Elin Electronics. In this section, we will compare the financials of EDL with its peers to give you an idea of where it stands compared to peers. Here is a comparison based on FY23 numbers:

• In revenue terms, Dixon Technologies is the largest player, while ELin Electronics is at the bottom of the table, while EDL is above it.
• EPACK has the lowest earnings per share (EPS) among peers. The average EPS of other peers is 32.91, while that of EDL is 4.71.
• The Return on Net Worth (RoNW) is highest for Dixon Technologies, followed by PG Electroplast and EPACK.

Below is a detailed comparison with exact numbers.

EPACK Durable Limited IPO: Financials

Let us look at EDL's financials to give you an idea of how the company has grown in recent years. Below are the recent years' financial numbers:

• The company has reported a revenue of Rs 739.66 crore, Rs 927.34 crore, and Rs 1,540.25 crore for FY21, FY22, and FY23, respectively. Revenue has grown at an exceptional 44.26% CAGR in this period. The top line for H1FY24 was Rs 616.32 crore.
• In FY23, the revenue contribution from the top 10 customers was 93.17%, while the top 5 contributed 82.66% of total revenue.
• EDL has reported an EBITDA of Rs 42.03 crore, Rs 68.80 crore, and Rs 102.52 crore for FY21, FY22, and FY23, respectively. The EBITDA margins for the same period were 5.71%, 7.44%, and 6.66%, respectively. The margins have been unpredictable in this period.
• They have reported a net profit (PAT) of Rs 7.80 crore, Rs 17.43, and Rs 31.97 crore for FY21, FY22, and FY23. In H1FY24, the company reported a PAT of Rs 2.65 crore.
• For the last three financial years, EDL has reported a fully diluted average EPS of Rs 3.75 and an average RoNW of 15.43%.
• If we attribute annualized FY24 earnings to post-IPO fully diluted paid-up capital of the company, then the asking price is at a P/E of 418.18, and based on FY23 earnings, the P/E stands at 68.86.
• Return on Capital Employed (ROCE) has increased from 11.72% in FY21 to 11.85% in FY23. ROE for FY21, FY22 and FY23 was 12%, 18.28% and 14.68%, respectively.
• The debt to equity ratio has come down from 3.47 in FY21 to 1.58 in FY23.

EPACK Durable Limited IPO: Competitive Strengths

As per the company, their competitive strength is as below:

• They have long-standing relationships with established customers, with the potential to expand their customer base.
• EDL is among the key manufacturers in the fast-growing RAC and SDA manufacturing industries.
• They have advanced vertically integrated manufacturing operations with a product portfolio aimed at capturing the full spectrum of the RAC and SDA value chain.
• The company has robust product development and design optimization capabilities.

EPACK Durable Limited IPO: Associated Risks

Below are the risks associated with the EDL:

• A significant portion of their revenue is generated from certain key customers and is concentrated with a few customers.