IKIO Lighting dazzles on debut; stock lists at 38% premium over issue price

Shares of IKIO Lighting were listed at Rs 392.50, a 38 per cent premium over its issue price of Rs 285 per share on the National Stock Exchange (NSE) on Friday.

IKIO Lighting (IKIO) made a strong market debut as shares were listed at Rs 392.5 apiece, a 38 per cent premium over its issue price of Rs 285 per share on the National Stock Exchange (NSE) on Friday. The stock of consumer electronics company started trade at Rs 391 on the BSE.

Post listing, the stock surged to a high of Rs 406 on the NSE, up 42 per cent when compared with the issue price. A combined 8.7 million shares changed hands on both the exchanges till 10:03 AM.

Analysts said that around 37 per cent gain for investors on the upper price band exceeded expectations.

"Considering the company's strong focus on research and development (R&D), backward integration, well-established relationship with clients, and the company's consistent financial performance, we suggest investors to hold this share for a longer period by keeping a stop loss 10 per cent below its listing price," said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart.

Siddesh Mehta, research analyst at SAMCO Securities observed that IKIO's bumper listing was justified by its past performance, and future growth potential.

"We recommend investors to capitalise on this listing pop by booking partial profits. With unique moats  and  key  competitive  edge  over  its  competitors,  IKIO  Lighting  is  poised  for continuous growth," he added.
 

The initial public offering (IPO) of IKIO saw strong demand with the issue subscribed 67.75 times. The institutional investor portion was subscribed 163.06 times, the high net worth individual (HNI) portion was subscribed 65.38 times, and the retail institutional investor (RII) portion by 14.31 times.

Commenting on whether primary markets are seeing a renewed interest among retail investors, Vinit Bolinjkar, head of research at Ventura Securities said that he does not foresee a significant change in investors' sentiment towards primary markets.

"After Mankind Pharma's decent listing at the exchanges, IKIO Lighting has seen a listing pop. Investors will give a thumbs up to good quality IPOs. However, we do not see any significant change in investors' risk-appetite. We continue to be wary of the primary markets in these volatile times," he added.

IKIO is an integrated player providing original design manufacture (ODM) services in the LED lighting segment. LED lighting contributes around 87 per cent to overall revenue. The company’s LED lighting offerings focus on the premium segment and include lighting, fittings, fixtures, accessories and components.

In 9MFY23, the company earned around 15 per cent of its total revenue from exports (mainly to US), while the rest were from domestic markets.

Consolidated revenue grew at CAGR of ~23 per cent over FY20-22 led by LED lighting segment, which grew at CAGR of ~24 per cent during the same period. Ebitda margin, meanwhile, increased 600 bps to 23.3 per cent supported by savings in raw material costs and other costs. PAT grew at a CAGR of ~54 per cent to Rs 51 crore tracking Ebitda margin expansion.

Analysts at Anand Rathi believed that the company has created a niche in functional decorative lights, commercial refrigeration lighting and recreational vehicles.

"The company's 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," the brokerage firm added.

That said, analysts warned high customer concentration, dependency on single product category, higher dependency on imports for supply of raw materials, were some of the key risks to IKIO's business.