Lava International, a leading end-to-end mobile handset and mobile solutions provider, is preparing to launch its Initial Public Offering (IPO). The company, known for its feature phones and mobile solutions, has established a strong presence both in India and internationally, especially in emerging markets. With plans for expansion, the IPO is generating considerable interest among potential investors.
About Lava International
Lava International, founded in India, is a major player in the mobile handset market, particularly in the feature phone segment. The company is the third-largest feature phone manufacturer in India and holds the fifth-largest position globally. Lava designs, manufactures, markets, distributes, and services mobile handsets, tablets, and other electronic accessories under the LAVA and XOLO brands.
The company has a significant international presence in markets such as Thailand, Sri Lanka, the Middle East, Bangladesh, Mexico, Indonesia, and Nepal. Lava has established a robust distribution network, catering to both domestic and global consumers. It has strong R&D capabilities and a well-recognized brand, known for offering affordable mobile solutions.
As of July 2021, Lava’s domestic network included 893 active distributors and 1,16,339 active retailers, ensuring the wide availability of its products. It also provides solutions to Original Equipment Manufacturers (OEMs) for mobile handset sourcing, design, manufacturing, software embedding, and distribution.
Lava International IPO: Key Highlights
- Issue Size: Lava International will raise funds through a ₹500 crore fresh issue and 437 lakh equity shares offered by existing shareholders.
- Use of Proceeds:
- ₹150 crore for marketing and brand building.
- The rest will fund acquisitions, strategic initiatives, and general corporate purposes.
- Market Lot: To be announced.
- Listing: The company plans to list its shares on the NSE and BSE.
Financial Overview of Lava International
Lava has demonstrated consistent revenue growth, although profitability and margins have fluctuated in recent years. Below is a detailed breakdown of Lava’s financial performance:
| Particulars | FY21 (₹ in Cr) | FY20 (₹ in Cr) | FY19 (₹ in Cr) |
| Revenue from Operations | ₹5,523.68 | ₹5,282.45 | ₹5,128.75 |
| Profit After Tax (PAT) | ₹172.61 | ₹107.76 | ₹73.18 |
| EBITDA | ₹183.12 | No data | ₹251.21 |
| EPS | ₹3.15 | ₹1.97 | ₹1.34 |
| Total Assets | ₹2,437.55 | ₹2,384.30 | ₹2,380.80 |
| Total Borrowings | ₹103.12 | ₹176.77 | ₹158.86 |
As seen in the table, Lava International has experienced steady revenue from operations, with ₹5,523.68 crore in FY21. The Profit After Tax (PAT) showed significant improvement in FY21, reaching ₹172.61 crore compared to ₹107.76 crore in FY20. However, EBITDA was notably lower in FY21, indicating challenges in maintaining operational profitability.
Strengths of Lava International
- Established Brand: Lava is a well-known brand in the Indian market, especially in the under ₹70 price segment for feature phones. The company has successfully expanded its reach, offering products and services under the Lava and XOLO brands.
- Global Presence: With operations in several emerging markets such as Mexico, Thailand, Sri Lanka, and more, Lava is well-positioned for international growth.
- Strong Distribution Network: Lava has an extensive network with 893 active distributors and 1,16,339 active retailers, enabling efficient product distribution.
- R&D Capabilities: Lava’s research and development capabilities are a key strength, allowing the company to innovate and stay competitive in a rapidly evolving industry.
- Low-Priced Mobile Solutions: The company has successfully catered to entry-level smartphone and feature phone markets, making mobile technology accessible to a broader demographic.
Risks and Challenges
- Competition: Lava faces significant competition from established global players in both the smartphone and feature phone markets, which could pressure its market share and margins.
- Changing Customer Preferences: With a growing shift towards smartphones, the company must adapt to the changing consumer preferences to maintain its revenue growth.
- Technological Obsolescence: The mobile handset industry is fast-paced, and failure to innovate or adapt to new technologies could lead to Lava’s products becoming obsolete.
- Legal and Intellectual Property (IP) Risks: Lava could face legal challenges related to intellectual property rights and product infringement, which may impact its financial standing.
Lava International IPO: The Way Forward
Lava International is well-positioned to capitalize on the growing demand for mobile handsets in emerging markets. With a market share of 13.4% in India for feature phones, Lava is solidifying its position in the competitive mobile handset industry. The Indian mobile phone subscription market is expected to grow at a CAGR of 3%, providing a solid foundation for Lava’s future growth. The company’s strong domestic network and recent agreements with Lenovo for Motorola handsets in India further bolster its market outlook.
As Lava prepares for its IPO, it plans to use the raised capital for strategic acquisitions and enhancing brand presence. The shift towards smartphones and mobile technology in India provides ample opportunity for the company to expand and diversify its offerings. Investors considering Lava’s IPO should be mindful of the company’s ability to adapt to changing market dynamics, competition, and technological trends.
Conclusion
Lava International’s IPO offers a unique opportunity for investors looking to tap into the growing mobile handset market in India and abroad. The company’s strong brand presence, extensive distribution network, and focus on research and development are key factors that make it an attractive investment. However, investors should weigh the risks, particularly in terms of competition, technological innovation, and legal challenges, before making their decision.
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