Foxconn’s India unit Bharat FIH Ltd plans to raise Rs 5,004 crore via an initial public offering (IPO), for which it has filed the draft prospectus with the Securities & Exchange Board of India (Sebi). It is the largest EMS provider in India with approximately 15% market revenue share in Financial Year 2021.
The IPO will consist of a fresh issue of shares of up to 25.02 billion shares and an offer for sale of a similar quantity by the promoter group and Foxconn unit Wonderful Stars.
Bharat FIH’s IPO comes at a time Foxconn’s plant near Chennai will reportedly remain shut this week following protests sparked by a food poisoning incident.
The Foxconn company derives most of its revenue in India from Xiaomi, which is the leader in the Indian smartphone industry with 27% and 26% market share by volume in Financial Year 2021 and the six months ended 30 September 2021.
Bharat FIH, which was previously known as Rising Stars India, provides manufacturing and assembly services for Xiaomi’s mobile phones in India. The company has operations across campuses in Andhra Pradesh and Tamil Nadu, each of which integrates manufacturing, warehousing, logistics and accommodation facilities.
“In Financial Years 2019, 2020 and 2021 and the six months ended 30 September 2021, Xiaomi accounted for revenues of Rs 300,946.54 million, 235,014.92 million, ₹149,086.77 million and ₹97,530.63 million, representing 87.81%, 89.05%, 94.24% and 96.13% of our revenue from operations for these periods,” the company revealed in the prospectus.
The company revealed that its is expanding its business into industries other than mobile phones, with a focus on high-growth industries that benefit from market tailwinds, including mechanics, electric vehicles, televisions and hearables.
Bharat FIH’s key competitors include domestic and international EMS/ODM providers such as Flextronics, Jabi;, Dixon, Sanmina-SCI Technology and Optiemus Infracomm as well as the in-house manufacturing and assembly departments of its existing and potential OEM customers
The company is also undertaking R&D efforts and intends to continue building its R&D teams to provide product design and development and other value-added ODM services. “We also intend to engage in joint R&D efforts with our OEM customers. Our future results of operations, and profit margins, will depend on our ability to develop new capabilities which meet evolving customers’ needs…to execute these strategies, we must make long-term investments, develop or obtain appropriate intellectual property, and commit significant resources…,” the company added.
The company recently established a Taiwan-based subsidiary, Bharat Taiwan Corporation, to explore opportunities for technology transfer and collaboration with our R&D centers in India. “As at 30 November 2021, our R&D team consisted of 23 R&D personnel. We expect to continue to dedicate significant financial and other resources to expanding our R&D team.”
Foxconn plant in south India to stay shut this week after protests: Govt sources
Five days of holiday have been declared at the plant, the Superintendent of Police in Kancheepuram said.
Bharat FIH, its DRHP, said that it may require additional capital or financing from time to time, including for expansion of manufacturing facilities and investment in R&D.
“While we have historically been able to finance our capital expenditure through equity contributions from the Promoter Selling Shareholder, Wonderful Stars, this may not be the case once we are a publicly listed company. We will have to finance our future growth from internal accruals and through external debt financing and equity fund raising,” it added.
Bharat FIH said that it is exploring opportunities to export its products to overseas markets, including the Middle East and Africa.
“Our location in India provides us with a geographical advantage and enables us to deliver products to local markets in those regions quickly and at competitive cost. We are also exploring opportunities to collaborate with mobile operators in Europe and the United States, with a view to exporting mobile phones and hearables that they can offer to their network customers,” it added in the prospectus.
Citigroup Global Markets India, BNP Paribas, HSBC Securities and Capital Markets (India) are among the lead book runners for Bharat FIH’s IPO.