IKIO Lighting IPO: GMP, should you subscribe, other details as issue opens today

The initial public offering (IPO) of IKIO Lighting, a LED lighting solutions provider, opens for public subscription on Tuesday and will close on June 8. The ₹607 crore-worth IKIO Lighting IPO consists of a fresh issue worth ₹350 crore and an offer for sale (OFS) of up to 90 lakh shares by promoters.

The price band for the IKIO Lighting IPO has been fixed at ₹270 to ₹285 per share. Promoters Hardeep Singh and Sumeet Kaur will participate in the OFS by offloading 60 lakh and 30 lakh equity shares, respectively.

IKIO Lighting has already garnered ₹182 crore from anchor investors on June 5. The company allotted 63.84 lakh equity shares to a total of 16 funds at an issue price of ₹285 per share, as per the data on the BSE.

IKIO Lighting's grey market premium (GMP) on Tuesday rose sharply ahead of the opening of its public issue.

IKIO Lighting IPO GMP today price was at ₹90 as against ₹70 per share on the previous day, as per IPO Watch. This means the shares of IKIO Lighting were trading at a premium of ₹90 in the grey market. As per the GMP, IKIO Lighting listing is expected to be at ₹375 per share.

Read Here: IKIO Lighting IPO: Ahead of subscription on Tuesday, GMP surges sharply; 10 key points here

Most brokerages have assigned ‘Subscribe’ rating to the IKIO Lighting IPO for the long term on the back of strong business model and fair valuations. Here’s what brokerages have to say:

Anand Rathi

IKIO Lighting has created its niche in functional decorative lights, commercial refrigeration lighting and recreational vehicles. Its ability to offer end-to-end solutions and its backward-integrated manufacturing have resulted in a strong business model with healthy RoEs despite operating on a smaller base than its peers, which cater mainly to the mass-market needs of leading brands, Anand Rathi said in a note.

At the upper IPO price band, the stock trades at 54x 9M FY23 EPS of R 5.3. 

However, the market leader in Indian decorative lighting, Signify is IKIO’s largest customer. A major market share loss of the former could curtail the latter’s offtake. Continuous customer on-boarding is critical for any contact manufacturer. Significant delay could curtail growth, the brokerage house said while listing the key risks for the company.

SBI Securities

At the upper band, the business is trading at a P/E multiple of 47.8x 9MFY23 annualised EPS. The IPO looks fairly valued across various valuation parameters when compared with its close peers. Investors can subscribe the issue for long term investment horizon.

Choice Broking

At the higher price band, IKIO is demanding a P/E multiple of 43.6x (to its restated FY22 EPS of ₹6.5), compared to the peer average of 94.6x. Based on our FY23E earnings, the demanded P/E is 32.7x, which is at discount to peer’s prevailing TTM P/E multiple of 43.2x. Thus we assign a “Subscribe” rating for the issue.