Kundan Edifice IPO Review: Kundan Edifice is coming up with its Initial Public Offering. This is an SME (Small and Medium-sized Enterprises) IPO, and the company is going to be listed on NSE SME platform.

The IPO will be open for subscription on September 12, 2023, and close on September 15, 2023. In this article we will look at Kundan Edifice IPO Review and analyze its strengths and weaknesses.

Kundan Edifice IPO Review – About The Company

Kundan Edifice Limited was incorporated in 2010, it is engaged in the business of manufacturing, assembly and sale of light-emitting diode (LED) strip lights.

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The company is believed to be one of the trusted electronics manufacturing services  (EMS) companies for providing end-to-end solutions in its area of operations to its customers.

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The company is primarily an original design manufacturer (ODM) that designs, develops, manufactures and supplies products to customers who then further distribute these products under their own brands.

The company also works to develop, manufacture and supply products that are designed by its customers.

The company focuses on unconventional forms of lighting products i.e., LED strip lights that have varied applications across industries such as real estate, railways, automobiles, decorative lighting, etc. 

The company has modern and state-of-the-art manufacturing and assembly facilities in Maharashtra with one located in Vasai and the other in Bhiwandi,with over 277 employees as of April 2023, to seamlessly develop, design, manufacture products and provide end-to-end solutions to its customers.

Its product list includes HV Flex- High voltage flex, LV Flex- Low voltage flex, RGB LV Flex (Smart Lights), and Accessories Kit.

The Company’s revenue bifurcation as of FY23 with respect to its operations in OEM is 97.55% and ODM is 2.45%.

Kundan Edifice IPO Review – Industry Overview

The Indian electronics system design and manufacturing (ESDM) sector is one of the fastest growing sectors in the economy and is witnessing a strong expansion in the country.

The Electronics System Design & Manufacturing (ESDM) industry includes electronic hardware products and components relating to information technology (IT), office automation, telecom, consumer electronics, aviation, aerospace, defence, solar photovoltaic, nano electronics and medical electronics. The industry also includes design related activities such as product designing, chip designing, Very Large- Scale Integration (VLSI), board designing and embedded systems. 

The Electronics System Design & Manufacturing (ESDM) market in India is anticipated to increase at a CAGR of 16.1% between 2019 and 2025, owing to strong demand, supportive government policies and increased digitalization.

The Government of India aims to make electronics goods amongst India’s 2-3 top ranking exports by 2026.

The PLI scheme for large scale electronics manufacturing launched by the Ministry of Electronics and Information Technology (MeitY) in April 2020 has been extended from the existing five years band (FY21-FY25) to six years (FY21-FY26). 

Kundan Edifice IPO Review – Financials

If we look at the financials of Kundan Edifice, it has reported assets worth 8.46 crore as of March 2020 and 29.65 Crore as of March 2023. By looking at this we can say that the company’s assets have increased by 3.5x which is a good sign as the company’s assets are growing rather than being stagnant.

In FY20 and FY23 the company generated revenue of 6.49 Crore and 60.46 Crore, the company’s revenue has increased by 10 times. The rise in revenue is accompanied by increasing profits, which has increased from 0.04 crore in 2020 to 5.13 crore in 2023.

Though the company is generating good revenue, it is only able to achieve and maintain net profit margins of approximately 5% in the past 3 years, in FY23 we can see that the company is consistently trying to increase its net profit margin as it generated 8.52%.

 In terms of return ratios, in FY23 it has an ROE of 63.28% and a ROCE of 43.69%. These ratios indicate a good return to shareholders’ capital and an efficient use of company resources.

The Company has reported a Debt-to-equity ratio of 1.79 as of FY23 which indicates a high level of debt in the company. So, we can come to the conclusion that the lower ROCE compared to the ROE was due to the high amount of debt the company has.

Financial Metrics

Kundan Edifice IPO - Financials

(Source: RHP of the company)

Competitors of Kundan Edifice

The company doesn’t have any listed competitors that exclusively undertake the manufacturing of LED strip lights.Hence taking basis factors such as the scale of the business and manufacturing of electronics products(as the company electronic products such as strip lights) a proxy set of listed peers are considered.

  1. Artemis Electricals and Projects Limited
  2. Focus Lighting and Fixtures Limited

Strengths of the company

  • The company has long-term relations with leading industry customers. Thus, it derives major part of its revenues from operations from repeat customers.
  • The long-term relationships and ongoing active engagements with customers allows it to plan its capital expenditures and enhance its ability to benefit from increasing economies of scale with stronger purchasing power for raw materials and a lower cost base.
  • The company has an In-house Research and development team, to address the diverse consumer 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.
  • The company has well equipped state-of-the-art manufacturing facilities with the latest machinery which are designed to cater to various products manufactured, therefore with its flexible manufacturing infrastructure and multiple product range, it can change its product mix in response to changes in the demands of its customers.
  • The company is led by experienced promoter directors with extensive domain knowledge.

Weaknesses of the company

  • The segment/business in which the company operates has low entry and exit barriers which in turn gives ease for entry of new players into the market and thereby increasing the competition.
  • The company is highly dependent on certain key customers for a substantial portion of its revenues. Loss of relationship with any of these customers may have a material adverse effect on its profitability and results of operations.
  • The company doesn’t own any registered office or manufacturing facilities under its name, it has taken them under a lease agreement for carrying out business activities. Disruption of its rights as licensee/ lessee or termination of the agreements with its licensors/ lessors would adversely impact its manufacturing operations and, consequently the business. 
  • The markets in which its customers compete are characterized by consumers and their rapidly changing preferences and other related factors including lower manufacturing costs, therefore as a result the Company may be affected by any disruptions in the industry.
  • The company presently does not own the trademark or logo under which it currently operates and if third parties infringe the trademark, logo and intellectual property that we use, our business and reputation would be adversely affected. 

Kundan Edifice IPO Review – GMP

The shares of Kundan Edifice traded at a premium of 41.76% in the grey market on September 8th, 2023. The shares traded at ₹129. This gives it a premium of ₹38 per share over the cap price of ₹91

Kundan Edifice IPO Review – Key IPO Information

IPO Size₹25.22Cr
Fresh Issue₹25.22 Cr
Opening dateSeptember 12, 2023
Closing dateSeptember 15, 2023
Face Value₹10 per share
Price₹91 per share
Lot Size1200
Minimum Lots1(1200 shares)
Maximum Lots1 (1200 shares)
Investment Amount₹109200
Listing DateSeptember 26, 2023

Promoters: Divyansh Mukesh Gupta & Vijay Mukesh Gupta

Book Running Lead Manager: Fedex Securities Private Limited

Registrar To the issue: Cameo Corporate Services Limited

The Objective of the Issue

The net proceeds from this issue will be utilized by the company for the following purposes

  • Meeting incremental working capital requirements
  • General corporate purposes

In Closing

In this article, we looked at Kundan Edifice IPO Review. Through this article, we can see that the company has had consistent growth in recent times and has further potential to grow in the future provided it continues to add more customers, diversify its customer base and continue its operations with efficiency.

Kundan Edifice is an SME (Small and Medium-sized Enterprise) IPO which is different than the regular IPO as the investment required, Lot size of shares is more and for this IPO the minimum investment required is ₹109200 and the Minimum/Maximum share lot size for retailers is 1200 shares.

What do you think the future holds for the company, do you believe the company will shine in the future like its LEDs? Are you applying for this IPO? Let us know in the comments below.

Written by Bharath K.S

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment decisions.

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