Objective
1) To meet the Working Capital requirements.2) Investment in Strategic Acquisition / Joint Venture.3) General Corporate Expenses.

Description
Kore Digital Limited (Kore Digi) was set up with an object to provide high-end communication solutions to corporate and Telecom Network Operators. We are a growing passive telecommunication infrastructure provider in Maharashtra, engaged primarily in the business of installing and commissioning of Poles, Towers and Optical Fibre Cable (“OFC”) Systems in Maharashtra. “Passive infrastructure” refers to the telecommunication towers for wirelesstelecommunication services and “OFC” is used for the purpose of hosting and assisting in the operation of the active infrastructure used for transmitting telecommunications signals or transporting voice and data traffic. Being a passive communication infrastructure Company, we are focused towards providing passive communication infrastructure services mainly to the Telecom Network Operators, Telecom Vendors, Broad Band Service Operators and Internet Service Providers (“ISPs”) in Maharashtra, especially in locations in and around Mumbai.

Objective
1. Repayment/ prepayment, in full or part, of certain borrowings availed by our Company and its Subsidiaries on consolidated basis2. Investment in our wholly owned Subsidiary, IKIO Solutions Private Limited, for setting up a new facility at Noida, Uttar Pradesh3. General corporate purposes

Description
We are an Indian manufacturer of light emitting diode (“LED”) lighting solutions. We are focused on sustainability and providing low energy LED products to help India meet its sustainability goals. We are primarily an original design manufacturer (“ODM”) and design, develop, manufacture and supply products to customers who then further distribute these products under their own brands. We also work with our customers to develop, manufacture and supply products that are designed by our customers. Our products are categorised as (i) LED lighting; (ii) refrigeration lights; (iii) ABS (acrylonitrile butadiene styrene) piping; and (iv) other products. Our LED lighting offerings focus on the premium segment and include lighting, fittings, fixtures, accessories and components. We provide lighting solutions (lights, drivers and controls) to commercial refrigeration equipment suppliers under our refrigeration light segment. We also manufacture an alternative to polyvinyl chloride (“PVC”) piping called ABS piping that is primarily used by our US customers for plumbing applications in the recreational vehicles (“RVs”) that they fit out. In addition, we manufacture and assemble other products including fan regulators that are designed by our clients; light strips, moulding, and other components and spares. Our equipment and systems are used in various industries and products, including residential, industrial and commercial lighting.

Kore Digital coming with an IPO to raise Rs 18 crore

The issue will open for subscription on June 2, 2023 and will close on June 7, 2023

Details

Kore Digital 

• Kore Digital is coming out with an initial public offering (IPO) of 10,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 180 per equity share.
• The issue will open for subscription on June 2, 2023 and will close on June 7, 2023.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 18.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is First Overseas Capital.
• Compliance Officer for the issue is Purnima Deepak Maheshwari.

Profile of the company

Kore Digital was set up with an object to provide high-end communication solutions to corporate and Telecom Network Operators. The company is a growing passive telecommunication infrastructure provider in Maharashtra, engaged primarily in the business of installing and commissioning of Poles, Towers and Optical Fibre Cable (OFC) Systems in Maharashtra. Passive infrastructure refers to the telecommunication towers for wireless telecommunication services and OFC is used for the purpose of hosting and assisting in the operation of the active infrastructure used for transmitting telecommunications signals or transporting voice and data traffic. Being a passive communication infrastructure Company, the company is focused towards providing passive communication infrastructure services mainly to the Telecom Network Operators, Broad Band Service Operators and Internet Service Providers (ISPs) in Maharashtra, especially in locations in and around Mumbai.

The company has been licensed by Department of Telecommunications (DoT) with the Infrastructure Provider (IP)-I License in the year 2009, under which it can establish and maintain assets Dark Fibres, right of way, duct space and tower for the purpose to grant on lease or rent or sale basis to the licensees of Telecom Network Operators, Broad Band Service Operators and ISPs. It also provided support services such as includes project management for laying of the duct and optic fibre cables, construction of basic transmission and telecom utilities, dark fiber leasing, optical fiber network construction, maintenance of duct and optic fibre and optical fibre project turnkey services to various, Telecom Network Operators & Broad Band Service Operators and ISPs across Maharashtra. Apart from laying the network under the project or own network, it is also engaged in the operations & maintenance activity of the fibre network and preventing the underground optic fiber therein from getting cut due to activities like road repairs, digging and expansion works by various authorities.

Under the IP-I License, last 14 years (from incorporation till 2023), it has commissioned more than 600 pole-based cell sites in and around Mumbai, developed its own network of around 450 KM underground Optic fiber Ducts during the last 5 years and in 2 years, the company has developed and delivered underground fiber optic backbone covering 450 KM underground Optic fiber Ducts in and around Mumbai.

Proceed is being used for:

• Meeting the Working Capital requirements.
• Investment in Strategic Acquisition / Joint Venture.
• General Corporate Expenses.

Industry overview

India has the second-largest telecom network in the world. In India, the total subscriber base stood at 1167.82 million in April 2022. Indian mobile economy is growing rapidly and will contribute substantially to India’s Gross Domestic Product (GDP) according to a report prepared by GSM Association (GSMA) in collaboration with Boston Consulting Group (BCG). In 2019, India surpassed the US to become the second largest market in terms of number of app downloads. The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector. The Government has enabled easy market access to telecom equipment and a fair and proactive regulatory framework, that has ensured availability of telecom services to consumer at affordable prices. The deregulation of Foreign Direct Investment (FDI) norms has made the sector one of the fastest growing and the top five employment opportunity generator in the country.

The Indian telecom market is witnessing unprecedented growth in data consumption. In order to sustain this increase in data uptake and support the proliferation of next-generation technologies such as 5G, internet of things and artificial intelligence, there is a need to ramp up the telecom infrastructure in parallel. More­over, the country’s communications infrastructure needs to be expanded in order to ensure the success of government programmers such as Digital India and the Smart Cities Mission. Both the central and state governments have launched a slew of schemes to create a conducive policy environment for encouraging investments in the telecom infrastr-ucture space. As part of the National Bro-adband Mission, the central government is working to provide broadband access to all villages by 2022. The government has also set a target of creating 10 million Wi-Fi hotspots by 2022, laying an incremental 3 million route km of optical fibre cable (OFC) and increasing the tower density from 0.42 tower per 1,000 of population to 1 tower per 1,000 of population by 2024. It is also working with the state governments to develop innovative implementation models for facilitating right-of-way (ROW) approvals for telecom towers and OFC. 

Pros and strengths

Established Optic fiber network in Maharashtra: Over the past years, the company has commissioned more than 600 Pole based cell sites in and around Mumbai, developed its own network of around 700kms during the last 5 years and in 2 years, the company has developed and delivered underground fiber optic backbone covering 600 kms in and around Mumbai. It has also laid fiber cable of around 2000 Kms for its Telecom Network Operators are Bharti Airtel, Vodafone Idea and Reliance JIO are in Ductrove Innovations Pvt Ltd, Sterlite Technologies Limited and Usha Martin Ltd, in Broad Band Service Operators which runs across Mumbai, Navi Mumbai, Thane, Bhivandi, Kalyan, Panvel, Pune. cities in Maharashtra. Apart from the own network, it has also undertaken Vendor Projects and developed a Network of around 200 Kms for its customers. This fibre network is currently being used by various companies such as companies like _Bharti Airtel Limited, Tata Teleservices, Vodafone Idea. Even after building a network running across 7 cities within Maharashtra, it is continuously expanding its fibre and duct network so as to be able to serve more customer needs and leverage economies of scale.

Efficient Business Model: The company’s growth is largely attributable to its efficient business model which involves careful identification and assessment of the project with emphasis on cost optimization which is a result of executing its projects with careful planning and strategy. Its core business of leasing the fibre and duct on IRU basis to telecom operators is a unique business model which forms a major portion of its revenue. Further the business of leasing the fibre and duct on IRU basis has emerged beneficial for the Telecom operators as there are increasing difficulties and the increasing price of ROW faced by the Telecom operators.  

Co-ordial relationship with its suppliers and contractors: In telecom sector, the mobile signal strength depends largely on the quality of the fibre cables used for transmission of signal from one place to another and the protection of such cable depends on the duct used to protect the fibre. In order to ensure customer satisfaction, quality of the work done and the timely delivery of the work are very important. In many of the projects, the customer provides the details of the suppliers from whom the material needs to be procured for the project. It also have a list of nominated suppliers and contractor with whom it has been working since long and it in the quality of the material provided and the work undertaken by them.

Risks and concerns

Depend on availability and supply and cost of equipments: The timely availability, cost and quality of the equipment’s being supplied to the company plays an important role in building strong foundation and long lasting markets and customers. If any disruption is there in either of the factors mentioned above which are not under its control, including general economic conditions, competition, production levels, transportation costs, government taxes and levies and if, for any reason, its regular/primary suppliers refuse or delay or discontinue the delivery of all or certain equipment’s to it in the quantities it need and at prices that are competitive, its ability to maintain the inventory levels and meet the customer requirements shall come to a temporary standstill and its delivery schedules could be disrupted. Further, it may also not be able to pass on any discounts and/ or increase in the prices of the products to its customers which could affect its results of operations and impact financial condition.

Operations subject to physical hazards and similar risks: The company’s business operations are subject to risks, including but not limited to, fatal accidents and mishaps or other force majeure conditions which are beyond its control. Though before commencement of any project, it undertakes a feasibility study of the site which involves study and identify the strata of the route, soil type, ROW (Right of Way) authorizations required, local hindrances, sleeve adequacy of the road to execute the route, underground utilities laid, if any, etc. However even after conducting the study there are always anticipated or unforeseen risks that may come up due to adverse weather conditions, geological conditions, specification changes and other reasons. In such a scenario, it may be required to provide compensation and related payments in relation to fatal accidents that have occurred at its project sites and as such cannot assure that such accidents will not happen.

Working capital requirements: The results of operations of the company’s business are dependent on its ability to effectively manage its inventory and trade receivables. To effectively manage its trade receivables, it must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. However, if its management fails to accurately evaluate the terms and conditions with its customers, it may lead to write-offs bad debts and/ or delay in recoveries which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations. A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact its profitability.

Outlook

Kore Digital operates as a Telecommunication Infrastructure Provider. The company was set up with the objective of offering high-end communication solutions to corporate and Telecom Network Operators. Kore Digital primarily operates in Maharashtra. They offer services like installing and commissioning Poles, Towers, and Optical Fibre Cable (OFC) Systems in Maharashtra. The company has been licensed by the Department of Telecommunications (DoT) with the Infrastructure Provider (IP)-I License in the year 2009. Under the license, they can establish and maintain assets Dark Fibres, right of way, duct space, and tower for the purpose to grant on lease or rent or sale basis to the licensees of Telecom Network Operators, Broad Band Service Operators, and ISPs. On the concern side, the company’s business operations may be affected by Weather Conditions which may restrict its ability to carry on activities related to its construction projects such as digging and laying of ducts and cable. Besides, the company monitor its inventory levels based on its own projections of future demand. Because of the length of time necessary to produce commercial quantities of its products, it must make production decisions well in advance of sales. An inaccurate forecast of demand for any product can result in the unavailability/surplus of products.

The company is coming out with a IPO of 10,00,000 equity shares of Rs 10 each at a fixed price of Rs 180 per share to mobilize Rs 18 crore. On performance front, during the Financial Year 2021-22, the total revenue accumulated is Rs 1693.92 lakh, in comparison from Rs 397.82 lakh in 2020-21, it is good growth approximate 4 times than the previous year. Profit After Tax (PAT) for Financial Year 2021-22 has increased from Rs 25.93 lakh to Rs 217.97 lakh from the previous year. Meanwhile, the company intends to continue to focus on enhancing its project execution capabilities. This continued focus will help it improve its operating capabilities which will help it in timely completion of the projects and within the estimated time and cost, this will again help it to improve margins and simultaneously enhance reputation amongst existing as well as new customers. Further, it intend to leverage its existing equipment’s and employee strength by utilizing advanced tools and skilled manpower so as to increase productivity and maximize asset utilization in projects. 

IKIO Lighting coming up with IPO to raise upto Rs 626 crore

The issue will open for subscription on June 6, 2023 and will close on June 8, 2023

Details

IKIO Lighting

• IKIO Lighting is coming out with a 100% book building; initial public offering (IPO) of 2,19,62,962 shares of Rs 10 each in a price band Rs 270-285 per equity share.
• Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
• The issue will open for subscription on June 6, 2023 and will close on June 8, 2023.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 10 and is priced 27.00 times of its face value on the lower side and 28.50 times on the higher side.
• Book running lead manager to the issue is Motilal Oswal Investment Advisors.
• Compliance Officer for the issue is Sandeep Kumar Agarwal. 

Profile of the company

The company is an Indian manufacturer of light emitting diode (LED) lighting solutions. It is focused on sustainability and providing low energy LED products to help India meet its sustainability goals. It is primarily an original design manufacturer (ODM) and design, develop, manufacture and supply products to customers who then further distribute these products under their own brands. It also works with its customers to develop, manufacture and supply products that are designed by its customers. Its products are categorised as (i) LED lighting; (ii) refrigeration lights; (iii) ABS (acrylonitrile butadiene styrene) piping; and (iv) other products. Its LED lighting offerings focus on the premium segment and include lighting, fittings, fixtures, accessories and components. 

The company provides lighting solutions (lights, drivers and controls) to commercial refrigeration equipment suppliers under its refrigeration light segment. It also manufactures an alternative to polyvinyl chloride (PVC) piping called ABS piping that is primarily used by its US customers for plumbing applications in the recreational vehicles (RVs) that they fit out. In addition, it manufactures and assembles other products including fan regulators that are designed by its clients; light strips, moulding, and other components and spares. Its equipment and systems are used in various industries and products, including residential, industrial and commercial lighting. 

The company’s manufacturing operations are a key driver of its business. It has four manufacturing facilities with one located in the SIDCUL Haridwar industrial park in Uttarakhand and three in Noida in the National Capital Region. In line with its focus to provide end-to-end product solutions and to develop better control on its supply chain and improve its margins, it has backward integrated its major manufacturing processes. It has developed in-house capabilities so that it manufactures all mechanical components in-house.

Proceed is being used for:

• Repayment/ prepayment, in full or part, of certain borrowings availed by the Company and its Subsidiaries on consolidated basis.
• Investment in the company’s wholly owned Subsidiary, IKIO Solutions Private Limited, for setting up a new facility at Noida, Uttar Pradesh.
• General corporate purposes.

Industry overview

Electronics is one of the fastest growing industries in the country. The total electronics market (which includes domestic electronics production and imports of electronic finished goods) in India is valued at Rs 9263 billion ($124 billion) in Fiscal 2022 and is expected to grow at a CAGR of 17.9% to reach Rs 17,902 billion ($240 billion) in Fiscal 2026. Domestic production accounted for approximately 69% of the total Indian electronics market in Fiscal 2022, valued at Rs 6,376 billion ($86 billion), and is expected to grow at a CAGR of 24.2% to reach Rs 15,159 billion ($203 billion) in Fiscal 2026, owing to various government initiatives to boost domestic electronics manufacturing industry. Also, the global landscape of electronic design and manufacturing is changing significantly, and revised cost structures have shifted the attention of multinational companies to India. At present, the Indian government is attempting to enhance manufacturing capabilities across multiple electronics sectors and to make the Indian electronics sector globally competitive. India is positioned as a destination for high-quality design work as well as a cost-competitive alternative. 

The Indian LED lighting market has seen an increase due to population growth and subsequently rapid urbanization in the last decade. With a growing rate of electricity use, demand for an environmentally sustainable and cost-effective lighting solution is also gaining momentum. Thus, LED lighting has begun to dominate the general lighting market of India tremendously in recent years. The incandescent bulbs, halogens and CFL lights have dominated the lighting market for centuries now but over the last decade LED lights have become very popular in the Indian lighting industry. These LED lights were first introduced to the Indian market in 1993. Since the LED light bulbs have been invented, there has been a drastic change in the industries of lighting technology. Many have adopted the new LED lights over the traditional incandescent and fluorescent lights. This is because LEDs give more light, have lesser environmental impact and last longer as compared to incandescent bulbs. User-segments such as the government and commercial segments have been witnessing exponential growth. The street lighting segment is also expected to be the biggest application for the next few years. Lately, energy-efficiency initiatives are gaining momentum in India. 

Pros and strengths

Poised to capture growth of LED market: With a proven operational and financial track record, the company is well-positioned to capitalize on opportunities provided by the tailwinds in the LED lighting market driven in part by governmental policies for energy saving and environment protection and importantly, the increasing awareness and adoption of LED lighting versus incandescent lighting. Further, LED lighting is central to reducing environmental impacts in both the residential, commercial and industrial sectors. Its comprehensive LED lighting offering allows it to offer its customers attractive manufacturing solutions for their products as well as its own product designs as part of its ODM business model. Its number of LED lighting products manufactured has grown by 41.82% from 660 in Fiscal 2020 to 936 in Fiscal 2022, and it is continuously expanding its portfolio.  

Diverse product basket with focus on high-margin areas: The company offers its products in four segments: (i) LED lighting; (ii) refrigeration lights; (iii) ABS piping; and (iv) other product. This wide range of products helps it captures a larger wallet share of its customers. Its LED lighting offering focuses on the premium segment and includes lighting, fittings, fixtures, accessories, and components. It also provides lighting solutions (lights, drivers and controls) to commercial refrigeration equipment suppliers under its refrigeration lights segment. In addition, it manufactures ABS piping which is an alternative to PVC that is primarily used by its US customers for plumbing applications in the RVs that they fit out. The company currently manufactures more than 753 SKUs for its largest customer, Signify (Philips) in India. In addition, it is in negotiations with some of its existing customers to supply its LED home lighting products to their international supply chain. 

Strong focus on R&D: The company’s R&D department focuses on product designing, tools and mould designing, electronic circuit designing and prototype designing. Its R&D department independently develops ODM designs and verifies and develops OEM designs received from customers and converts such designs into deliverable products by improving the designs, recommending suitable raw materials and testing of trial products. The R&D team also aims to provide solutions through automation to improve manufacturing efficiency on the existing products, reduce production costs and assists its customers by providing design and engineering support. It focuses on activities to support its customers including concept sketching, design refinement, generating optional features and testing. This enables it to address its consumers’ diverse needs, introduce new and innovative products in the market, enhance existing products with emerging technologies, and optimize costs across its products through value analysis and value engineering. 

Established infrastructure with backward integration: The company has developed the proficiency to produce many of the components used in its manufacturing processes with its in-house tool room capabilities that has modern machines, moulds and tools. Except for the diodes and resistors used in its LED lighting products, all mechanical components are manufactured by its. Its manufacturing infrastructure is a key driver of its business. It has four manufacturing facilities with one located in the SIDCUL Haridwar industrial park in Uttarakhand and three in Noida in the National Capital Region. Its manufacturing facilities are equipped with machinery and equipment like assembly lines, automatic surface-mounted machines, automatic metal cutting and shaping machines and automatic powder coating for fixtures. In line with its focus to provide end-to-end product solutions and to develop better control on its supply chain and improve its margins, it has backward integrated its major manufacturing processes. It has developed in-house capabilities so that it manufacture all mechanical components inhouse (save diodes and resistors).

Risks and concerns

Dependent on LED lighting product: The company is dependent on its LED lighting product category. While it has expanded its product lines to include ABS pipes, refrigerator lights and other products, it expects that in the future its LED lighting product category will continue to comprise a significant percentage of its operating revenue. Consequently, if it is unable to maintain or expand its sales volumes in the LED lighting category for any reason, maintain its relationship with its key customers in this product line and/or diversify its LED lighting customer base, it may experience material fluctuations or decline in its revenue and reduction in its operating margins, as a result of which its business, results of operations and financial condition could be materially and adversely affected. 

Do not receive firm, long-term volume purchase commitments from customers: The company typically enters into a period purchase orders for a specific range of products with its customers which is valid for three years and renewed thereafter. Within this period, products are manufactured and sold on a purchase order basis. Its purchase orders with its key customers typically include the terms and conditions including the return policy are set forth in the purchase orders and master agreements. Customer orders usually specify shipping arrangements and packing material and are subject to, among other things, regulatory requirements, various import duties and other government clearances in the case of exports. Based on these arrangements, its customers provide it with purchase orders which typically include precise terms for lead time for delivery of products, delivery schedule in terms of quantities for certain months. There is no guarantee that despite having contractual arrangement with its customers, that it is assured of generating revenues in the future as they are not under any obligations to outsource their manufacturing requirements to it.

Rely on number of third party suppliers for key components: The company relies on a number of suppliers for its raw materials, components and stock-in-trade which are an integral part of its products as well as suppliers for its customer support services. While it has not historically encountered problems with availability, and its global sourcing team has mitigated these risks by increasing inventory for some of these materials, this does not mean that it will continue to have timely access to adequate supplies of essential materials and components in the future or that supplies of these materials and components will be available on satisfactory terms when needed. Given its reliance on its suppliers, if any one of its suppliers is unable to deliver its raw materials, components or customer support services in a timely manner, or at all, or meet its design or quality specifications, it may be unable to meet its product and service delivery timelines.

Operate in competitive environment: The market wherein the company operates is competitive, rapidly evolving and is characterized by frequent introductions of new piping products, lighting solutions, applications and technologies. It expects competition to persist and intensify in the future as the market wherein it operates is constantly evolving and growing with new and existing competitors devote considerable resources to introducing and enhancing products. Accordingly, its ability to grow its business in accordance with its strategy will depend on its ability to introduce new products, adapt to new technologies, respond to pricing strategies by competitors, redevelop its brand, execute agreements with technology partners, improve its manufacturing capabilities and technology and develop intellectual property.

Outlook

IKIO Lighting is an Indian manufacturer of light-emitting diode (LED) lighting solutions. In its journey of over seven years, the entity focused on providing sustainability and low-energy LED products to help India meet its sustainability goals. The product portfolio of IKIO can be categorized as LED lighting, Refrigeration lights, ABS (acrylonitrile butadiene styrene) piping and other products. The company is primarily an Original Design Manufacturer (ODM). They design, develop, manufacture and supply products to customers. Thereon, the customers further distribute the products under their own brands. Alongside, they also work with the customers to develop, manufacture and supply products as designed by the customers. The company's LED lighting offerings focus on the premium segment and include lighting, fittings, fixtures, accessories, and components. The products are designed and created to cater to the distinct requirements and expectations of the customers. On the concern side, the company does not receive firm and long-term volume purchase commitments from customers. Besides, the company relies on imported components from vendors in China, Singapore, Hong Kong and Taiwan. Any shortfall in the supply of its imported components and raw materials or an increase in its component or raw material costs, or other input costs, may adversely affect the pricing and supply of products and have an adverse effect on business, results of operations and financial condition.

The company is coming out with an IPO of 2,19,62,962 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 270-285 per equity share. The aggregate size of the offer is around Rs 592.99 crore to Rs 625.94 crore based on lower and upper price band respectively. On the financial front, the company’s total income on a restated basis increased by 37.92% to Rs 2,207.19 million for Fiscal 2022 from Rs 1,600.39 million for Fiscal 2021, primarily due to a 37.72% increase in revenue from operations. Its profit after tax on a restated basis increased by 36.10% to Rs 280.10 million for Fiscal 2022 from Rs 205.80 million for Fiscal 2021. Going forward, the company plans to continue expand its ODM business to new international markets. It intends to focus its expansion on North American markets and gradually expand to the European and South East Asian markets. In its opinion, these markets offer it the ability to market its premium LED offerings. It intends to achieve this expansion by employing dedicated sales and marketing teams whose primary focus will be on business development in international markets, particularly, in its focus geographies.