EPACK Durable IPO – Details and Review

EPACK Durable IPO would open for subscription on January 19 and closes on January 23, 2024. Company is the second largest room air conditioner original design manufacturer (ODM) in India. In this article we would provide EPACK Durable IPO Details, key dates, IPO Size, IPO Objectives, Positive Aspects, Risk Factors and complete Review.

About EPACK Durable Limited

It is the second largest room air conditioner original design manufacturer (ODM) in India in terms of number of units (indoor units + outdoor units) manufactured in Fiscal 2023 through the ODM route.

They are a customer-centric business driven by a focus on continuing innovation and operational efficiency.

They also identified the opportunity to increase its value addition in its offerings to customers, and accordingly, started manufacturing of various components such as sheet metal, injection moulded, cross flow fans and PCBA components which are actively used in the manufacturing of RACs.

In parallel, they capitalised on its existing manufacturing infrastructure to strategically expand its operations in the small domestic appliances market, particularly considering the seasonality of the demand for RACs, and currently design and manufacture induction cooktops, mixer-grinders, and water dispensers. This evidences its continued focus on the backward integration of its operations and diversification of the revenue streams.

EPACK Durable IPO – Key Details

IPO Opening Date January 19, 2024
IPO Closing Date January 23, 2024
IPO Listing Date January 29, 2024
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price band Rs 218 to Rs 230 per equity share
Lot Size 65 Shares
Listing at BSE and NSE
Total Issue Size Rs. 640.05 Crores
    Fresh issue     Rs. 400 Crores
    OFS     Rs. 240.05 Crores

EPACK Durable Limited Financials

Financial Year ending / Period ending (Amt in Crores)
Period Ended 31-Mar-21 31-Mar-22 31-Mar-23 30-Sep-23
Assets 520.37 1,076.68 1,464.16 1,071.45
Revenue 739.66 927.34 1,540.25 616.32
Profit After Tax 7.80 17.43 31.97 2.65

EPACK Durable IPO Objectives

The objectives of the IPO has both OFS and Fresh issue

1) Offer for Sale (OFS) for Rs 240.05 Crores – Under OFS the IPO proceeds would go to selling shareholders and company would not benefit anything.

2) Fresh issue of Rs 400 Crores – The proceeds would be used for the following:

  • Funding capital expenditure for the expansion/setting up of manufacturing facilities.
  • Repayment and/or prepayment, in part or in full, of certain outstanding loans of the company.
  • General corporate purposes.

EPACK Durable IPO – Positive Aspects and Strength’s of the company

  • Company is the second largest room air conditioner original design manufacturer (ODM) in India.
  • Company has long-standing relationships with established customers, with potential to expand its customer base.
  • Company is among the key manufacturers in the fast-growing RAC and SDA manufacturing industries with robust product development and design optimisation capabilities
  • Strong revenue growth in the past.

EPACK Durable IPO – Risk Factors in this IPO

  • Company earns thin margins between 0.4% to 2.08%. These margins have declined too from 2.08% in FY23 to 0.43% for 6 months ended Sep-23.
  • Company IPO objectives contain both OFS and fresh issue. For OFS, the money would go to selling shareholders and company would not get benefitted.
  • A significant portion of its revenue is generated from certain key customers. Any loss of such customers can have affect on the business.
  • Its customers do not make long-term commitments to them and may cancel or change their sourcing requirements which can affect the business and operations.
  • Investors can refer to EPACK Durable IPO RHP for complete risk factors

EPACK Durable IPO Price Valuation

  • The IPO price band is Rs 218 to 230 per share
  • P/E Ratio Analysis
    • If we consider last 3 years weighted EPS of Rs 3.75, the P/E ratio works out to be 61x.
    • If we consider the last year FY23 EPS of Rs 4.64, the P/E ratio works out to be 50x.
    • If we consider the 6 months ended Sep-23 EPS and annualise it, the P/E ratio works out to be 338x.
    • Means company is asking the issue price between P/E ratio of 50x to 338x.
  • Comparison with listed peers
    • Dixon Technologies Limited trading at P/E 140x (Highest)
    • Elin Electronics Ltd is trading at P/E of 24x (Lowest)
    • Industry average P/E is 75x
  • Hence, the IPO Price band at P/E of 50x to 338x is overpriced

EPACK Durable IPO Review – Should you Subscribe or not?

After going through the entire article, you might be wondering whether this IPO is good or bad for investment and whether you should subscribe or not.

Company is the second largest room air conditioner original design manufacturer (ODM) in India. It has long-standing relationships with established customers, with potential to expand its customer base. Company generated strong revenue growth in the past.

On the negative side, company earns thin margins and these have declined for 6 months ended Sep-23 compared to previous years. IPO objectives contain OFS too which goes to selling shareholders and company would not get benefitted. Also a significant portion of its revenue is generated from certain key customers which poses risk in case of loss of any of them.

The issue price is over priced.

Personally I would like to skip such IPOs for now.

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