An initial public offering will allow Motilal Oswal Private Equity, which invested in Dixon Technologies in 2008, to sell some of its stake
Mumbai: Motilal Oswal Private Equity-backed electronics manufacturer Dixon Technologies (India) Pvt. Ltd is in talks with investment banks for an initial public offering, two people aware of the development said.
An IPO will allow Motilal Oswal PE, which invested in the company in 2008, to sell some of its stake, one of the two people cited above said, requesting anonymity as the talks are private.
Dixon Technologies makes printed circuit boards, LED TVs, mobile phones, washing machines, compact fluorescent and LED lamps, among others. Its clients includes consumer electronic brands such as Panasonic, Intex, Gionee, Godrej, Haier, Phillips and Anchor. The company also sells TVs under its own brand Weston. The company has manufacturing plants at Dehradun in Uttarakhand and Noida in Uttar Pradesh.
“They (Dixon) have been having discussions with several investment banks for the IPO. The share sale will be a mix of primary fund-raising and an offer for sale to allow Motilal Oswal to part exit its stake in the firm. Motilal has been invested in the firm for almost eight years now and is keen to exit their investment," said the first person cited above.
The company is expected to hire investment banks for the planned share sale soon.
Motilal Oswal had invested Rs40 crore in Dixon in July 2008 from its first private equity fund—India Business Excellence Fund I (IBEF I).
According to the second person cited above, the IPO is likely to be at least Rs300 crore. He also spoke on the condition of anonymity.
“It will largely be an OFS, but the company will also raise primary capital to fund capex for future growth," he said.
Emails sent on Friday to Sunil Vachani, chairman of Dixon Technologies, and Atul Lall, managing director at the firm, went unanswered.
Motilal Oswal too did not reply to an email.
This will be the fourth portfolio firm from Motilal Oswal’s IBEF I fund that is looking to go public.
On 29 September, its portfolio firm GR Infraprojects Ltd filed its draft red-herring prospectus with markets regulator Securities and Exchange Board of India. Motilal Oswal, which holds a 10% in the firm, plans to sell a large chunk of its holding.
In May, the PE fund sold some of its stake in Pune-based dairy firm Parag Milk Foods Ltd in an IPO. In 2015, it sold some of its stake in Power Mech Projects Ltd, when it went public.
IBEF I, a $125 million growth capital PE fund, made a total of 13 investments. Some of the investments include BPO firm Effort BPO Ltd, material handing equipment manufacturer ElectroMech and transformer maker IMP Powers Ltd.
According to a 21 July investor presentation by Motilal Oswal Financial Services Ltd, IBEF I has seen four full exits and four partial exits translating into approximately 198% capital returned (in rupees) to its investors.
“The fund is in advanced stages for three exits in the next few months, which may allow it to return an additional ~20% capital. It expects to divest the balance companies in FY17/18. The fund is likely to deliver a gross multiple of over 3.5 times," the presentation said.
The buoyancy in the Indian IPO market, which has seen 38 companies raising almost Rs25,500 crore in the last 18 months, has been driven by private equity companies looking to sell their investments.
Most recent IPOs have been from healthcare, financial services and consumer companies. Within manufacturing, most public offers have come from the auto component space. So far this year, auto-component firms Precision Camshafts Ltd and GNA Axles Ltd have raised funds through IPO. Endurance Technologies Ltd, another component firm, is launching its IPO on 5 October.
Last week, consumer lighting and electric equipment manufacturer HPL Electric and Power Ltd raised Rs361 crore through its IPO.
“Old economy sectors are not growing in the manner that they should grow, so not many new companies are emerging in these sectors and hence, one would expect to see fewer IPOs from these sectors," said Prithvi Haldea, chairman of Prime Database group, a primary market tracker.
However, he added that the primary market today is agnostic to sectors.
“The market is rewarding companies which have a credible track record, where financials are clean and the future looks promising. Investors have also shown interest in companies with private equity investors, where the PE fund is not completely exiting the firm in the IPO," he said.