Upcoming Semiconductor IPOs to Watch Out in 2024

Semiconductor technology is driving innovation and technological progress across industries while shaping India's economy.

The Indian government is strongly promoting the semiconductor sector to boost manufacturing and technological development.

Union Minister Rajeev Chandrasekhar recently mentioned that semiconductor chips worth Rs 1,297 billion (bn) were imported in financial year 2022-23.

This import value reflects the absence of commercial fabs in India, highlighting the country's reliance on imported semiconductor products.

However, India's semiconductor ambitions have recently received a boost, with PM Modi inaugurating three new manufacturing and assembly facilities in Gujarat and Assam.

The sentiment right now is stronger than ever with several chip manufacturing companies eyeing for a potential stock market debut.

Out of all the prime candidates, these two companies are highly anticipated to launch an IPO in 2024.

#1 Tata Electronics

First on the list is Tata Electronics.

It is stepping into the semiconductor industry which is expected to be worth $1 trillion by 2030 globally.

Starting with an Outsourced Semiconductor Assembly and Test (OSAT) unit, Tata Electronics is making semiconductor chips ready for use.

Tata Electronics specializes in manufacturing precision components and is a greenfield venture of the Tata Group. Their expertise lies in producing high-quality components with a focus on precision engineering.

The company has plans to expand commercial production from India's semiconductor fabrication unit by 2024. This initiative is part of Tata Group's broader strategy to enhance India's semiconductor capabilities.

Tata Electronics has partnered with Taiwanese chipmaker Power Chip Semiconductor Manufacturing Corporation (PSMC) to establish a semiconductor fab unit in Gujarat's Dholera with an investment of Rs 910 bn.

The fab unit will manufacture power management chips, display drivers, microcontrollers, and high-performance computing logic ICs for various markets including automotive, artificial intelligence, data storage, and computing.

The collaboration between Tata Electronic and Taiwanese chipmaker aims to produce "Make in India" chips for both international clients and the growing domestic market. It also aims to invest $11 bn in its plant in Gujarat.

The Indian Government has approved three semiconductor projects in India worth Rs 1.2 trillion .

Under the umbrella of Tata Group, even Tata Elxsi plays a supporting role in providing semiconductor services. It assists in designing semiconductor components including display drivers, microcontrollers, power management chips, and high-performance computing logic ICs.

Tata Electronics has secured funds exceeding Rs 76 bn through a combination of capital infusion and secured loans.

In the previous fiscal year, the company received over Rs 6 bn in capital infusion from its parent company, Tata Sons, marking it the highest investment in a single financial year bringing a total investment by Tata Sons to Rs 18.2 bn.

Despite this substantial investment, Tata Electronics reported a net loss of Rs 5.3 bn in FY23 attributed by experts to its early developmental phase.

Tata Group is eyeing a share of the growing semiconductor industry through Tata Electronics.

While there may not be a rush for immediate IPOs, the conglomerate's ambitious plans to exceed their initial investment targets suggest a strong development towards public offerings in the coming years.

#2 Polymatech Electronics

Second on the list is Polymatech Electronics.

Polymatech Electronics was established in 2007 and is India's pioneer semiconductor chips manufacturer. They specialize in optical fibre components, sapphire wafers, and micro motors with a unique focus on producing opto-semiconductor chips since 2019.

It is one of the leading opto-semiconductors companies in India, which recently announced a strategic partnership with Japan's prevision manufacturing firm Orbray.

This partnership focuses on sapphire water fabrication.

Sapphire ingots are crucial materials used in the LED industry which shows the significance of this collaboration for Polymatech semiconductor chip manufacturing capabilities.

Implementing Japanese technologies, Polymatech supports a wide range of industries where microelectronics plays an important role in enhancing lives.

The company's state-of-the-art facilities in Oragadam, Sriperumbudur, and upcoming operations in Krishnagiri, position Polymatech as a leading player.

Polymatech Electronics has shown significant growth in gross sales, total income, and gross profit from March 2021 to March 2023:

Description	FY21	FY22	FY23
Gross Sales	450.1	1259.7	6490.2
Total Income	471.9	1280.7	6516.2
Gross Profit	124	436.1	2043.2
PAT	62.8	342.6	1678
Debt to Equity	0.7	0.6	0.1
Current Ratio	0.3	2.2	4.9
ROCE (%)	16	45.6	73.2
RONW (%)	14	66.1	87
Adjusted EPS	0.99	5.4	23.3

Data Source: Ace Equity
All figures in Rs million

There is an improvement in the gross profit margin over the years indicating efficient cost management and possibly higher pricing power.

The company has effectively managed its debt-to-equity ratio which shows prudent financial management and a strong capital structure.

Polymatech has also delivered impressive returns with increasing profitability reflected in its rising return on capital employed (ROCE) and return on net worth (RONW) over the specific period.

The company, known for its innovative solutions, is potentially gearing up for an IPO soon.

With its IPO, the company aims to raise funds between Rs 7.5 bn to 10 bn with an expected price band of Rs 680-750 per share.

Polymatech's current unlisted market price stands at Rs 860 per share which indicates investor confidence in its potential growth.

The IPO proceeds will be used to acquire new machinery for its existing facility in Tamil Nadu. It will also enhance production capacity and operational efficiency.

The future looks promising for Polymatech Electronics as it shows strong financial performance and strategic partnerships like Orbray for sapphire wafer fabrication and expansion plans.

In Conclusion

Semiconductor stocks are at forefront of driving innovation in technologies like artificial intelligence, 5G, and the internet of things (IoT).

Investing in semiconductor stocks and upcoming semiconductor IPOs not only fuels tech advancement but also offers long-term growth prospects.

However, nothing is certain in investing and any unforeseen challenge/s could place these semiconductor companies in a tough spot.

Hence you must treat semiconductor stocks with the same amount of caution as other stocks. Do a thorough research before choosing stocks for your portfolio.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...