Aditya Infotech Limited (Avoid)

Highlights

Aditya Infotech Limited (AIL) incorporated in 1995, is engage into the business of providing comprehensive range of advanced video security and surveillance products, technologies and solutions for enterprise and consumer segments under CP PLUS brand which has strong recall value.

Their business is primarily classified as: (i) manufacturing and trading activities; and (ii) trading activities. Their manufacturing and trading activities include the manufacture and sale of their CP PLUS products and the provision of after-sales services in relation to the CP PLUS products sold by them, while their trading activities are limited to distribution of products of Dahua.

In addition, they offer solutions and services such as fully integrated security systems and Security-as-a-Service directly and through their distribution network who address the requirements of end-customers engaged in a broad range of sectors such as banking, insurance, real estate, healthcare, industrial, defence, education, hospitality, manufacturing, retail and law enforcement.  

AIL product line comprises high definition (HD)-analog cameras, digital video recorders (DVRs), internet protocol (IP) network cameras, network video recorders (NVRs), biometric 240 products, access control products, mobile surveillance solutions, body-worn cameras, thermal cameras, temperature screening solutions, interactive displays, routers, cables, power supplies (SMPS), racks and other accessories and products.

Out of the total proceeds of Rs. 13,000 mn, ~Rs. 3,750 mn would go towards repayment of certain borrowing availed by the company. Rs. 1,250 mn would be utilized for general corporate purposes and Rs. 8,000 mn would go towards existing promoter selling shareholders of the company.

Key Highlights

• Video surveillance is a fast-growing market driven by the need for improved safety and security. From close to USD 1 bn in FY20, the video surveillance market in India reached USD 1.3 bn. In FY25 with growth until 2030 estimated at a CAGR 16.46 pct. In FY25 39.7 mn of video surveillance units sold and it expected to reach 74.6 mn in FY30F, showing CAGR of 13.5 pct over FY25-30.
• In 2017, AIL entered into a joint venture agreement with Dixon Technologies (Dixon) to expand manufacturing operations by creating a captive manufacturing plant and leveraging Dixon’s expertise in manufacturing processes. On September 18, 2024, AIL acquired Dixon’s stake in the joint venture for which AIL received Rs. 2,486 mn in exchange of share swap where Dixon got 6.61 pct stake.
• The company sells in house products and Dahua Technologies products and together hold ~25 pct market share (20 pct is AIL and 5 pct is Dahua). Out of total sales 24.65 pct sales comes from products supplied by Dahua which is Chinese company and as per latest government rules, Ban on China made CCTV products will add short term headwinds for the company.
• Latest government norms also present opportunity for the company as new regulatory development aligns with AIL long-standing commitment to secure, reliable, and indigenously manufactured surveillance solutions. Some of their product lines are STQC certified, and as such, compliant with the stringent cybersecurity protocols, positioning AIL to benefit from the evolving regulatory landscape.
• AIL’s key growth strategies includes (i) Leverage India’s regulatory framework for cybersecurity to strengthen market leadership (ii) Continue to innovate and introduce new products and next generation of existing products, developing an ecosystem for commercial and consumer use (iii) Expand retail presence through additional experience centres and stores (iv) Focus on service led model and enterprise customers (v) Increase production at kadapa facility
• The sales of the company have grown by 16.71 pct CAGR Over FY23-25 and EBITDA/profit has grown 19.47 pct CAGR/80.11 pct CAGR over same year. In FY25 the company reported sales of Rs. 31,119 mn, which grew 11.84 pct YoY while EBITDA of the company rose 9.26 pct YoY to Rs. 2,584 mn. In FY25 the company posted profit of Rs. 3,514 mn which jumped 205.08 pct YoY due to exception gain of Rs. 2,486 mn received due to Dixon’s share swap arrangement.

Key Risk

• AIL import a portion of their parts and materials primarily from China and government wants localized supply chain for CCTV manufacturers.
• AIL are subject to strict quality requirements and the sale of their products is dependent on quality controls and standards.
• AIL has been restricted to sell their products under certain identified trademarks in certain geographical regions, including, the Middle-East, Africa, and the Commonwealth of Independent States.

Financial Performance

Valuation

Aditya Infotech Limited (AIL) is comprehensive surveillance and electronic security brand with the most extensive portfolio in the entire industry. Recognizing that investing in technology means investing in innovation, AIL aim to make security more and more accessible through their brand CP PLUS in order to enrich lives everywhere with an enhanced living experience.  At the upper end of the price band of Rs. 675, the issue is priced at a PE of 56.88x its FY25 earnings on post issue equity capital. The issue appears to be aggressively priced. One can avoid this issue.

Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Advisor before making any investment using the app. Investing using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.