Homegrown mobile phone maker Lava International is almost ready for its IPO (Initial Public Offering) as it has notified all shareholders of an extraordinary general meeting on 10 September 2021. The company will seek shareholders’ approval for this IPO worth Rs. 2,400 crores, consisting of an offer for sale by existing shareholders and issuance of fresh equity.
Let’s take a more detailed look at this upcoming Lava International IPO and whether it’s a good investment.
Lava International is the country’s own mobile phone manufacturer headquartered at Noida in Uttar Pradesh. Founded in 2009 as an offshoot telecom venture, the company has expanded its operations to over 11 countries, including Nepal, Thailand, Sri Lanka, Indonesia and the Middle East. It is a market leader in several countries and is currently expanding its presence in Africa.
Lava has been developing its mobile handset design capabilities since its inception. It claims to be the only Indian brand to completely design its devices and manufacture PCB (Printed Circuit Boards) using SMT (Surface Mount Technology) in this country. The company has two manufacturing plants and in-house research and development centre in India.
Lava has a wide portfolio of products comprising smartphones and tablets available in various models and price points. Currently, the handset maker has a product range of 15 phones, with nine feature phones and five smartphones.
Lava is gearing up for its Rs. 2,400 crores IPO. However, promoters of this company are unlikely to be affected as they will not be parting with their stake through the IPO.
Lava has sent a letter/email to all shareholders for a meeting seeking approval for the IPO. It will also consider and approve seven different items related to it.
The extraordinary general meeting (EGM) will also make a decision about the issuance of bonus shares in 1:1 to existing shareholders. In addition, the company will seek approval for a stock split of shares to a face value of Rs. 5 per share. According to some dealers in the unlisted market, shareholders were informed on both bonus issues and stock split via email.
Lava intends to strengthen its balance sheet through this IPO, enabling it to take on its bigger Chinese rivals. It is also eyeing expansion, keeping exports in focus, having submitted a proposal to make low-cost phones in the US for top telecom players.
Following the successful conclusion of this meeting, Lava will file for DRHP (draft red herring prospectus) in the following weeks. It will also undertake consultation with its BRLMs (book running lead managers) and other advisors to decide on the offer.
Lava International has reported Rs. 5,264 crores revenue for the year that ended on 31 March 2020. This is an increase from net revenue of Rs. 5,108 crores reported in the previous year. The net profit of Lava stood at Rs. 107 crores compared to Rs. 73 crores reported for the previous year.
Lava has grown its total equity from Rs. 12,553.32 million in FY2018-19 to Rs. 14,081.10 million in FY2019-20. Its total comprehensive income for the year 2019-20 was at Rs. 1522.04 million compared to Rs. 908.02 million in the previous fiscal year.
Lava shares rose by 10-20% in the grey market following announcement of its IPO. In the second half of May 2021, it was trading at Rs. 325 per share and following the IPO buzz, increased to Rs. 600 to Rs. 625 apiece.
The company has, however, not announced its earnings for the financial year that ended on 31 March 2021.
At current valuations, the stocks may be available at twice the sales-to-market cap, making it a decent bet. However, one may want to wait for the latest financial report to see if it’s true.
Some experts are bullish on the shares as the phone maker may be a big beneficiary of the Indian Government’s PLI (Production-Linked Incentive) scheme. This scheme will very likely boost Lava’s margins, considerably improving the bottom line of its shares.
Lava is yet to file its DRHP with market regulators by SEBI. Once it is filed, we will know the particulars of this IPO and update all important information.
The company will hold an EGM with all shareholders to discuss various points, including approval for this IPO, issuance of bonus shares and stock split.
Lava International has been granted approval under the scheme, allowing it to get a 4-6% incentive for mobile manufacturing.
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