IKIO Lighting Limited
Company
| Website 🔗 |  |
| Business Activity | Manufacture |
| Division | Electronics |
| Sub-class | LED Lighting |
| Location | Haridwar, Uttarakhand (1 Unit) Noida, Uttar Pradesh (4 Units) |
| Establishment Year | 2016 |
Management
| Managing Director | Hardeep Singh |
| Educational Qualifications | Higher Secondary Education |
| Experience | Over two decades of experience in electronic components, and LED lighting |
| Annual Salary | ₹187 Lakhs |
| Total Number of Employees | 1489 |
About
Overview:
The company’s primary business is designing, developing, manufacturing, and supplying LED lighting solutions. The company operates primarily as an Original Design Manufacturer (ODM), creating and producing products that clients then distribute under their own brands.
Products and Services
IKIO Lighting Limited boasts a diverse product portfolio comprising over 1,000 SKUs (Stock Keeping Units), strategically focused on high-value, niche, and innovative products. The company’s product offerings can be broadly categorized into three main segments:
LED Lighting Solutions: This segment includes LED lighting products, such as high-end home decorative lights, indoor and outdoor lights, and specialized LED lights for recreational vehicles (RVs).
Product Display Lighting: This segment focuses on providing interior LED lighting solutions for product displays, particularly in the commercial refrigeration sector.
Energy Solutions & Others: This segment encompasses a range of products and solutions, including solar panels and ABS piping, an alternative to PVC piping, which is manufactured for plumbing applications in Recreational Vehicles (RVs) primarily for the US market.
IPS stabilizers for commercial refrigeration, rotary switches, fan regulators and assemblies, lithium batteries, and USB chargers.
Raw Materials:
Diodes, resistors, printed circuit boards (PCBs), semiconductor materials, plastic and polymers, aluminium die-cast and extruded aluminium, various metals, cable connectors, and consumables like solders and solder paste.
The company primarily sources these raw materials from third-party suppliers, both domestically within India and internationally, with a significant portion being imported from China.
Clients:
IKIO Lighting Limited operates on a business-to-business (B2B) model, catering to a diverse clientele across various industry sectors and geographies. The company’s largest customer is Signify Innovations India Limited (formerly Philips Electronics India Limited), a dominant player in the Indian lighting market.
The company serves other notable clients such as Western Refrigeration Private Limited, Panasonic Life Solutions India Private Limited, and Novateur Electrical & Digital Systems Private Limited. The company also boasts a growing international customer base, primarily in the United States, which includes clients like Everlast Lighting Inc. and Znergy Inc.
Research and Development (R&D):
IKIO’s business model is characterized by its strong focus on research and development (R&D), which enables it to innovate and stay ahead in the competitive LED lighting market. The company’s R&D efforts span product design, tool and mould design, electronic circuit design, and prototype development.
Work Flow Chart
Revenue – Category
Audit and Legal
Related Party Transactions:
The share of related party transactions in total sales for FY 2023-24 was 2.79%.
Auditor’s Remark:
Unqualified opinion on both the standalone and consolidated financial statements of IKIO Lighting Limited for the fiscal year ended March 31, 2024.
Audit Trail Feature:
The feature of the recording audit trail (edit log) facility was not enabled at the database level to log any direct data changes for the accounting software used for maintaining the books of account relating to payroll and general ledger.
Delay in Utilization of IPO Proceeds:
There has been a delay in the utilization of IPO proceeds for the new facility in Noida
Contingent Liabilities:
Contingent Liabilities are not significant compared to the size of the company
The primary contingent liability relates to a demand under the Sales Tax Act for FY 2018 against pending C-Forms, amounting to ₹2.9 Crore
In addition to the sales tax demand, the consolidated financial statements also disclose a contingent liability of ₹1.9 Crore related to corporate guarantees given by the company.
SWOT Analysis
Strengths
| Strong R&D capabilities: The company’s focus on research and development has led to a diversified product portfolio and the ability to offer ODM services, enhancing its competitive edge. |
| Backward integration: The company’s vertical integration in manufacturing processes ensures quality control, cost efficiency, and timely deliveries. |
| Strong financial performance: The company has demonstrated consistent growth in revenue and profitability, with healthy return ratios. |
Weaknesses
| Dependence on key customers: A significant portion of revenue comes from a few key customers, posing a risk if these relationships are disrupted. |
| Imported components: Reliance on imported components exposes the company to currency fluctuations and supply chain disruptions. |
| External factors: The company’s performance is influenced by external factors such as raw material costs, macroeconomic trends, and government policies. |
Opportunities
| Growth in LED market: The expanding LED market, driven by government initiatives and increasing consumer adoption, presents a substantial growth opportunity for IKIO. |
| Expansion into new product lines: The company’s foray into hearables and wearables, along with its expansion into the US market, offers avenues for further growth and diversification. |
| Government initiatives: Favorable government policies, such as the PLI scheme, promote domestic manufacturing and exports, creating a conducive environment for growth. |
| Rising demand for energy-efficient lighting: The increasing focus on energy efficiency and sustainability presents an opportunity for the company to expand its market share with its LED lighting solutions. |
Threats
Porter’s Five Forces1
| Threat of New Entrants | HIGH |
| The LED lighting market in India is attracting new entrants due to favourable government policies and the growing demand for energy-efficient lighting solutions. The relatively low barriers to entry in the industry further intensify the threat of new entrants. |
| Bargaining Power of Suppliers | MODERATE |
| The company relies on third-party suppliers for raw materials and components, some of which are imported. The global chip shortage and supply chain disruptions have highlighted the potential risks associated with supplier dependence. |
| Bargaining Power of Buyers | HIGH |
| The company’s dependence on a few key customers, particularly Signify (Philips), gives these buyers significant bargaining power. The company also operates in a B2B model, where buyers are typically large and sophisticated organizations. |
| Threat of Substitute Products or Services | LOW – MODERATE |
| While LED lighting has gained significant popularity, traditional lighting technologies such as CFL and incandescent bulbs still exist as potential substitutes, especially in price-sensitive markets. The company also faces competition from imported LED products. |
| Rivalry Among Existing Competitors | HIGH |
| The LED lighting market in India is highly competitive, with the presence of both established players and new entrants. The company faces competition from both domestic and international players. |
Peer Comparison
Profitability:
IKIO demonstrates significantly higher profitability compared to its peers, as evidenced by its superior EBITDA and PAT margins. This indicates efficient cost management and a focus on high-margin products.
Size and Scale:
Compared to Dixon Technologies and Amber Enterprises, IKIO operates on a smaller scale, which might limit its bargaining power with suppliers and customers.
Comparison has been made for the 9M period ending December 31, 2022
| Particulars | IKIO (Restated Consolidated) | Dixon Technologies (India) Limited | Amber Enterprises India Limited | Syrma SGS Technology Limited | Elin Electronics Limited |
| Revenue from operations(Crores) | 220 | 10,697 | 4,206 | 1,019 | 1,093 |
| EBITDA margin (%) | 18.26% | 3.54% | 6.55% | 9.26% | 7.22% |
| PAT margin (%) | 12.69% | 1.78% | 2.63% | 5.49% | 3.58% |
| ROCE (%) | 41.63% | 20.54% | 9.82% | 12.15% | 19.49% |
| ROE (%) | 36.64% | 19.08% | 6.28% | 9.72% | 12.92% |
Green Box
Focus on High-Value, Niche Products:
The company’s strategic emphasis on high-end LED lighting solutions and other specialized products allows it to command premium pricing and achieve higher profit margins compared to competitors operating in the mass market.
Strong In-house R&D:
IKIO’s robust research and development capabilities enable it to innovate and develop new products, meeting evolving customer demands and staying ahead of the competition.
Backward Integration:
The company’s vertical integration in manufacturing processes, including backward integration for manufacturing of LED light fixtures such as Powder Coating, Injection Moulding, and CNC Turning, ensures quality control, cost efficiency, and timely deliveries, giving it an edge over competitors relying on external suppliers.
The company’s total debt decreased significantly due to the repayment of borrowings using the IPO proceeds.
New Products:
Started sales of two new product categories, Hearables ( Earphones) and Wearables (Smart Watches)
In addition to the RV business, the subsidiary company in the US has started generating revenue by supplying Industrial and Solar products to ESCO (Energy Services Companies).
Amber Box
Decrease in EBITDA Margin:
The company’s consolidated EBITDA margin decreased from FY 2023 to FY 2024. The management attributed this to upfront expenses related to team expansion and new product categories. While these investments are expected to yield future benefits, the decline in margin could be a point of concern.
Seasonality of Business:
The company’s business is subject to seasonality, with the third and fourth quarters being the strongest sales periods, leading to potential fluctuations in revenue and profitability throughout the year.
Red Box
Customer Concentration:
The company’s heavy reliance on a single customer, Signify (Philips), for a substantial portion of its revenue (51.31%)poses a significant risk. The loss of this key customer or a reduction in their orders could severely impact IKIO’s financial performance.
Dependence on Imported Components:
The company’s reliance on imported components exposes it to currency exchange rate fluctuations and potential supply chain disruptions, impacting its cost structure and profitability.
Images
- For Porter’s Five Forces, the force value of “LOW” is considered good. ↩︎
Disclaimer: The above information/document is based on publicly available sources and has been issued solely for educational and informational purposes and should not be considered as investment advice or as a Buy/Sell recommendation, or as a research report. Although due diligence has been done to ensure the accuracy of the data presented, the website or authors are not responsible for any decision arising out of an inadvertent mistake or error in the data presented on the website. The authors may also have equity shares in the companies mentioned in this report adhering to provisions of regulation 16 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. The investor is advised to consult his/her investment advisor and undertake further due diligence before making any investment decision in the companies mentioned. Authors are not liable for any financial gains or losses due to investments made as per the information provided on this website (StocKernel.com).