lets understand the curious story of IZMO Microsystem Limited the growth engine of Izmo.
I was looking at Photonics considering the proposed ban on Chinese optical transceivers for use in US Datacenters . Optical transceivers are again photonics devices
The only listed company in India market has been IZMO.
However, on mere reading of the Investor Presentations since Calendar Year 2024 posted a serious question .
How did IZMO which was software solutions company targeting automobile sector in a couple of quarters become a Semiconductor story with partnership with IITM for Photonics
I tried to find an answer in the FY23 & FY24 annual reports and understood the Izmo Microsystems was only founded in 2023 .
The EPFO website showed Izmo Microsystems having 90+ employees in April 2024 within 3 months of incorporation . The registration date on EPFO website showed up as 15-DEC-2023..
Within 3 to 6 months of incorporation , setting a team of 90+ employees and declared they have been working with IITM on Silicon Photonics ..
I had to dig deeper into his operations . What is Izmo MicroSystem origins.. wondered whether IZMO was really a deep tech company spending 10 to 12 crs in R&D each year as stated in their old Investor Decks before launching IZMO Microsystems
As the most logical conclusion , I thought IZMO must have done a acquisition of some existing Silicon Photonics company and would have not disclosed the same to the exchanges . The area in Whitefield where Izmo Microsystems claimed they had their office was close to the Electronics and MNC Chipset design centers so it made logical sense that IZMO acquired some small company and got the business in IZMO Microsystems
But then , there was missing records . How was this acquisition funded .. IZMO Microsystems as per FY 24 Annual Report had Capital of Rs. 1 lacs , Total Asset of roughly 2 odd crs and Total Liabilities of approx 2.5 crs . This did not make sense for anyone to sell such a valuable business to IZMO Microsystems for free
The curiosity in me made me dig deeper and here is the interesting part and I started scouting IZMO Microsystems employees to see their past work experience
https://www.linkedin.com/in/slpinjare-3576253b/
https://www.linkedin.com/in/aravinda-g-679732280/
These are just 2 examples , however what was common that the company which repeated itself from where IZMO Microsystems acquired employees majorly was Si2 Microsystems .
And ironically the employees joined IZMO Microsystems in April 2024 the exact same month as shown in EPFO Data.
This at least confirmed my fact and understanding that IZMO Microsystems was the acquired business and IP of Si2 Microsystems Ltd.
The next step was to look at the location of Si2 Microsystems Ltd. Eureka as per Google Maps they existed in Whitefield and are Permanently Closed now
The next step was to look at the capabilities Si2 Microsystems had
Stumbled upon this Listing on Indiamart and it exactly matches what Izmo Microsystems is doing..
https://www.indiamart.com/company/2298773/aboutus.html?srsltid=AfmBOopU_bz92Osqq9odWHn4TsyXCmfs_1h_9die5Lj8PCxYQRtKN9F6
But now the interesting part starts .. The team section had the following names
- Dinanath Soni is the member of the board and Executive Director of Si2
- Sanjay Soni is the member of the board and President of Si2 India.
This was the same related party Si2 Microsystems mentioned in their Annual Reports . This meant IZMO had genuine capabilities hiding in their unlisted company Si2 and they silently brought it into IZMO Microsystems.
The puzzle is solved . But wait here is the twist .
Dig deeper on SI2 Microsystems and its name listed on opensanctions.org which is a database on entities / actors on whom sanctions has been put in the past or present.
They were listed as Export controlled & Sanctioned across the globe from EU / USA to Japan
Wanted to dig deeper . And the cause why they have been sanctioned
This article on The Hindu gives the complete reason
“The government is examining details of an Indian tech company involved in semiconductor research, that was sanctioned by the European Union on Friday for its dealings with Russia. The company is a partner of the Ministry of Electronics and Information Technology (MeitY) for a very recent “Atmanirbhar Bharat” (Make in India) collaboration”
What was alarming this was not the only violation of bypassing sanctions to supply to Russia
“The company, Bengaluru-based high-tech firm Si2 Microsystems, has a complex history as it has been banned by the U.S. from “dual-use” technology transfers as well, and its directors had been placed on Lookout Circular (LOC) notices by Indian authorities over debt defaults. A few years ago, a director had approached courts for a waiver of the LOC so as to travel to Russia, his lawyers confirmed, indicating that the company had urgent and close ties with Russian counterparts. However, the company and its directors remained unavailable for comment on the latest sanctions, that were announced to mark two years of the Russian war in Ukraine.”
Now this helps us build a sequence of events
- Nov 2023 - US Sanctions Si2 Microsystems
- Dec 2023 - Izmo Microsystems is incorporated
- Feb 2024 - Sanction news makes it to media as well as Govt Authorities
- April 2024 - Si2 Microsystems shut down and relocated to a new address of Izmo Microsystems ..
This explains the evolution of Izmo Microsystems. Affiliating with IIT-M ( which has produced way more deep tech / high tech companies than another IIT ) means Si2 and now Izmo genuinely have some capabilities in silicon photonics.
However , the dealings of the promoter group leave alot to be answered . This transfer from Si2 to Izmo Microsystems in my personal opinion does not seem to be a genuine acquisition but a “Jugaad”
The key risk remains if the same set of activities are happening in Izmo Microsystems which led to the sanctions ,Izmo Microsystems runs the risk of sanctions once again, which can lead to a permanent capital erosion for minority stakeholders.
Disclosure : This post is purely based on the the sequence of events and publicly available information and are my personal views.
