If you look at listing gain, Indian IPOs had a 79% success rate in 2023. Now that the first two weeks of the year are gone, it’s time for another exciting initial public offering (IPO) from a well-known ODM manufacturer.
With a compound annual growth rate of 10.1%, the size of the Indian consumer durables market increased from fiscal year 2018 to fiscal year 2023. In this scenario, the subscription period for the EPACK Durables Limited IPO is scheduled to run from January 19, 2024, to January 23, 2024.
That said, let’s deep dive into what EPACK Durables has to offer in its upcoming IPO with a look back at its history and financials. Let’s get started!
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Overview of EPACK Durables Solutions Private Limited
EPACK Durables Limited is a room air conditioner original design manufacturer (ODM). The product line of EPACK Durables is divided into three groups: components, small household appliances, and room air conditioners. The business places a high value on continuous innovation and efficient operations, with a customer-focused approach.
History
EPACK Durables is a division of the longer-running EPACK Group, which has been around since 1999. It all started when Ajay Singhania, the CEO of EPACK Durables Solutions Private Ltd., in his family’s factory in Noida, started assembling foreign air conditioners for multiple international companies.
This was, in many respects, carrying on the legacy of his late father, Deendayal Singhania, who founded EPS Packaging — now home to EPACK Durables Private Limited (EDPL)—along with his friend, the late Pooran Bothra.
Today, in addition to its primary focus on room air conditioners, EPACK Durable Ltd. has grown into the market for small domestic appliances (SDAs). However, EPACK Durable Ltd. has branched out into the production of induction hobs, blenders, and water dispensers, among other lateral segments.
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Mission and vision
Maintaining high standards, going above and beyond for clients, and fully comprehending their requirements are the cornerstones. The organisation is dedicated to attentive listening, flexible adaptation, and timely delivery.
Their goal is to provide services for the whole SDA value chain, including room air conditioners. EPACK Durable collaborates with the customer service department to personalise products for each client.
EPACK Durables today
Today, with a 29% market share, EPACK Durable is India’s second-largest original design manufacturer (ODM) of room air conditioners.
There are five operations and production divisions under EPACK Durable Ltd. at present. Of the five units, four are based in Dehradun as production facilities. The company operates specialised R&D facilities in Dehradun, Bhiwadi, and Greater Noida.
EPACK Durable got a second round of funding led by Affirma Capital in September 2022. The total amount raised was USD 40 million, which is about ₹318 crore. Its initial round of funding was 24 million USD, which came from ICICI Venture.
EPACK Durable’s financials
| Financials | FY23 | FY22 | FY21 |
| Total income (in ₹ crores) | 1,540.25 | 927.34 | 739.65 |
| Profit after tax (in ₹ crores) | 31.97 | 17.43 | 7.80 |
| EBIDTA Margin (%) | 6.66 | 7.44 | 5.71 |
| Total borrowings (in ₹ crores) | 4,924.45 | 3,839.81 | 2,622.66 |
EPACK Durable IPO details
| EPACK Durable IPO Date | January 19, 2024 |
| IPO issue closing date | January 23, 2024 |
| Face value | ₹10 per share |
| EPACK Durable IPO share price/ Price band | ₹218 to ₹230 per share |
| Issue size | ₹640.05 Cr (27,828,351 shares) |
| Fresh issue | ₹400.00 Cr (17,391,304 shares) |
| Offer for sale | ₹240.05 Cr (10,437,047 shares of ₹10) |
| IPO reservations | Not less than 35.00% for retail investors, Not more than 50.00% for QIBs, and Not less than 15.00% for NII (HNIs) |
Shareholding pattern prior to IPO
| Shareholder | Shareholding percentage |
| Bajrang Bothra | 12.32% |
| Laxmi Pat Bothra | 7.00% |
| Sanjay Singhania | 11.79% |
| Ajay DD Singhania | 11.79% |
| Pinky Ajay Singhania | 4.51% |
| Preity Singhania | 4.51% |
| Nikhil Bothra | 4.65% |
| Nitin Bothra | 4.65% |
| Rajjat Kumar Bothra | 3.99% |
| Hridaya Chordia | 0.15% |
Five members of the promoter group and four promoters in total will be selling shares in the OFS (Offer for Sale). India Advantage Fund and Dynamic India Fund, two early investors, will also be selling OFS shares. After the issue, the promoter’s stake will be reduced to 65.36 percent.
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Fund utilisation plan
The business plans to finance the following objects with the net proceeds from the fresh issue:
- ₹230 crores for funding manufacturing facility expansion/setup capital expenditure:
In Bhiwadi, Rajasthan, the business plans to establish a new factory. The proposed location’s proximity to the current plant in Bhiwadi, Rajasthan, will result in a quicker and more seamless project execution process.
The company plans to establish another new manufacturing plant in Andhra Pradesh’s Sri City. This site is ideal for meeting the needs of the South Indian market, according to the business.
- ₹80 crores for repayment/prepayment of company loans:
The business has taken out 113 different types of loans from banks and other lending institutions, comprising term loans, working capital loans, cash credit facilities, and others.
- General business objectives:
The organisation plans to use the funds for various corporate objectives, such as purchasing raw materials, paying lease expenses, and paying commissions, among other things, to fuel the company’s growth.
Is it safe to invest in EPACK Durable?
The business seems to have potential and is growing rapidly. To begin with, they should be well-served by the government’s current standing in the sector.
To IPO investors, the share price of EPACK Durable might seem too high, but they should also consider that the company is benefiting from the growing trend of outsourcing manufacturing operations to external service providers.
Given the anticipated margin pressures in the outsourcing industry, IPO investors can take a more long-term perspective on the stock. This initial public offering might seem suitable for long-term investors who are ready to wait more than a year and have a greater risk appetite.
Why should you consider investing?
Looking at EPACK Durable Ltd.’s strengths, we can see that they are solid.
- There is a chance for the company to grow its customer base and maintain existing relationships with clients.
- The company’s ability to keep tabs on expenses and inventory levels is a result of its closely linked manufacturing processes.
- At a time when businesses must adapt quickly to stay competitive, the company’s strengths in product development and design optimisation set it apart.
Factors to keep an eye out for
- There are cyclical financial ups and downs in the air conditioner industry due to seasonal changes and market fluctuations. Cash flow is not consistent throughout the year due to the seasonal nature of the business.
- The majority of its revenue comes from a small number of highly valuable customers. At about 85% of the group’s total revenue in fiscal 2022, ACs were the main contributor.
Conclusion
With India’s booming consumer durables industry, EPACK Durable shines among its peers. Though valuations seem stretched currently, its competitive strengths in a high-growth environment make this IPO a long-term portfolio prospect for investors believing in India’s growth story.
