Osel Devices Ltd

Stock Opportunities SME Stocks
1

1. Company Overview

  • Incorporation and Business Evolution: Established in 2006, Osel Devices Ltd. (ODL) began as a trading company, transitioning to manufacturing in 2019. The company produces LED display systems and hearing aids, with each segment contributing approximately 36% and 64% of total revenue in FY 2024, respectively.
  • Products and Capacity: With a manufacturing facility in Greater Noida, Uttar Pradesh, ODL has an annual production capacity of 15,000 sq. ft. for LED displays and 400,000 units for hearing aids.
  • Management: The company is promoted by Rajendra Ravi Shanker Mishra and Jyotsna Jawahar, both of whom bring significant experience in the healthcare equipment industry.

2. Financial Performance

  • Revenue Growth: ODL’s revenue has grown at a CAGR of 32% over the past three years, reaching INR 132.25 crore in FY 2024, with expectations of 30-35% revenue growth in FY 2025 due to increasing capacity utilization.
  • Profit Margins: Profit After Tax (PAT) increased from INR 5.03 crore in FY 2023 to INR 12.15 crore in FY 2024, with a PAT margin rising from 6.14% to 9.19%.
  • Debt and Leverage: The company’s leverage remains moderate, with a gearing ratio of 1.02 times in FY 2024, expected to decline to around 0.8 by FY 2025.

3. Key Operational Highlights

3.1 Diverse Clientele and Market Reach

  • ODL serves a reputable mix of clients across private and government sectors, including ISRO, PVR Ltd., Lulu Mall, and Artificial Limbs Manufacturing Corporation of India. This diverse clientele helps mitigate revenue dependency on specific sectors.

3.2 Product Diversification and Technological Advancement

  • The company has invested in technology to enhance its hearing aid offerings, incorporating digital and smart technology, and remains focused on advancing product quality in the healthcare equipment industry.

3.3 Manufacturing Capacity Utilization

  • The company’s Greater Noida facility has been instrumental in meeting rising demand. Increasing utilization rates will be critical for sustaining the anticipated revenue growth in FY 2025 and beyond.

4. Financial Health and Liquidity

  • Debt Protection Metrics: Interest coverage ratio in FY 2024 stood at 6.57 times, indicating strong debt serviceability. Cash accruals are projected to remain healthy, expected to cover annual debt obligations comfortably.
  • Liquidity: ODL’s liquidity is supported by moderate bank line utilization (78.5%) as of mid-2024. The recent enhancement of bank lines is expected to support working capital needs and provide a buffer for unforeseen cash flow requirements.

5. Industry Outlook and Market Drivers

The India hearing aids market, estimated at USD 4.23 billion in 2023, is projected to grow at a CAGR of 7.89%, reaching USD 7.18 billion by 2030. Key market drivers include:

  • Rising Hearing Loss Incidences: An aging population and increasing awareness of hearing health are expected to drive demand.
  • Technological Advancements: Integration of smart technology and digital enhancements into hearing aids is transforming the market.
  • Favorable Government Policies: Healthcare policies are encouraging investment and access to affordable hearing solutions, creating new growth opportunities for companies like ODL.

6. Strategic Future Plans

6.1 Capacity Expansion and Technological Investments

  • ODL plans to enhance its manufacturing capacity to address growing demand in the hearing aids and LED display markets. This expansion is aligned with the company’s goal to increase capacity utilization and improve operational efficiency.

6.2 Product Innovation and Customization

  • In response to competition and the need for differentiation, ODL is focusing on customization and technology integration in its hearing aids, aiming to create a unique selling proposition.

6.3 Strengthening Financial Stability

  • Continued focus on debt reduction and prudent working capital management aims to strengthen ODL’s financial position, ensuring liquidity to support growth initiatives.

7. Investment Thesis

  1. Growing Market: The expanding hearing aids market in India provides a positive growth outlook, with a steady demand supported by demographic changes and policy support.
  2. Experienced Management: The promoters’ deep industry knowledge helps in market navigation, supplier relationships, and strategic partnerships.
  3. Diverse Client Base: Serving both government and private sectors mitigates revenue dependency and enhances revenue stability.
  4. Operational Efficiency: A high capacity utilization strategy and advancements in production technology will help sustain profitability and drive revenue growth.

8. Investment Risks and Anti-Thesis

  1. Technology Obsolescence: Rapid advancements in healthcare equipment technology present a challenge. To remain competitive, ODL must continually invest in R&D to avoid obsolescence.
  2. Supply Chain Vulnerability: Heavy reliance on Chinese suppliers for raw materials makes ODL susceptible to supply chain disruptions and material cost fluctuations.
  3. Working Capital Intensity: Maintaining sufficient inventory and fulfilling custom orders requires high working capital, posing a challenge for cash flow stability.
  4. Competitive Pressure: ODL operates in a competitive landscape, facing established players that could impact market share and pricing flexibility.

9. Conclusion

Osel Devices Ltd. is positioned to capitalize on the growth opportunities within the hearing aids market, supported by experienced leadership, a growing client base, and solid financial health. However, challenges such as technology risk and supply chain dependency require proactive management. With its focus on capacity expansion, technological innovation, and financial stability, ODL shows promise as a resilient player in the healthcare equipment industry.

Disc - Not Invested (No transactions in last 30 days)

9 Likes
5

Don’t know the journey(as they said in interview they have multiple products before) ?

How they arrived at hearing aids to led ?

Two different category of product ?

Wha are their future plan ?

What strategy they going to use for capture a growing electronic export market also demand in india? (China+1)

if anyone know any of the question please give answer

1 Like
6

Recently they got rights to manufacture and sell “Philips” brand in india.
Everything else is not very interesting. They just import all the equipments related to hearing devices and then assemble it in India.
However, the valuations seems to be attractive considering the growth that has been visible in the recent past. It is trading at around 20 times FY25 earnings.
As this is a microcap, risk has to be managed at the portfolio level.

Disc. Invested around CMP

2 Likes
7

I have a few questions if someone can answer:

  1. They raised IPO money of around 70 cr for debt payment, working capital and GCP. So have they paid 45cr worth of debt ?
  2. They are doing expansion in hearing aid - they got a land too. But they never mentioned that expansion as part of IPO plans? or Did they? I didnt watch the interview.
  3. Phillips deal - when can we expect revenue to kick in ?
  4. This warrant to promoter and fund infusion - this is for phillips manufacturing project ?
  5. Have they officially given any guidance (on interview or somewhere) ?
  6. Earkart deal -when do we expect B2C revenues to come from this venture ?
  7. I somehow get a feel after studying this business that upcoming 1 year or so is their capex gestation period where they will do the capex and seems like working capital could be stretched. Maybe thats why the promoter infused funds via warrants as loan they just paid back via IPO money so cannot take loan again. Correct me if I am wrong here.
  8. One anchor (invicta fund) increased stake potentially signalling some good times ahead ? (How do I read this ? as other anchors have trimmed or exited too) (Following anchors is important as they 90% times have more information and mgmt access)
1 Like
8

One thing I don’t understand that on 1st september current price of share is 544 and new capital raise through equity shares and convertible warrants at price of only 340 per share on 1st September.
I means why there is huge difference between the price of two . I don’t find any reasonable answer for it

OSEL_01092025122733_Outcome.pdf (558.5 KB)

9

Could be the fair value is around 340. Investors like Mukul Agarwal (Preference allotee in latest allotment @ 340, 40% discount to LTP) would not pay unreasonable price to a SME. Onboarding such investors enhances face value and visibility of SME’s.

Though I like the business and growth prospects (not much interested in the Philips feature phone), the price is unreasonable (not happy with the price arbitrage game here) even after the exchange filing the price didn’t budge that means Retail investors ki hod lagi hui hain.

10

Philips feature phone seems to be a good play to enter the market with. The white space is in feature phone vs smart phones where the market has been captured by cheap chinese phones.
Philips tried to enter with a chinese players and saw the issue first hand. Thus OSEL came into picture, i think the numbers for Philips feature phone looks good - still to be seen officially. Other segments are definitely good too. But philips is a trigger where retail investors saw hunger for growth with the management.

Hod lagi hui hain is actually not a bad thing. Its a sign that smart money chases growth prospects in the indian market

1 Like
11

Osel Devices Limited launches new product “PHILIPS SMARTPHONES” under its mobile phone category
These smartphones are tailored for users seeking premium technology at an affordable price, for which distribution will be commenced within December, 2025.

3 Likes
12

Company has put Increase in Short Term Borrowings of Rs.50 crore in the Operating Activities section of the Cash Flow Statement instead of the normal practice of showing it under Financing Activities. This has inflated the CFO to positive Rs.10 crore which would have otherwise been negative Rs.40 crore.

image
image1188Ă—392 117 KB

(Disc.: No positions)

6 Likes
13

Good catch

Even FY25 OCF figures are not in line, -68.65 Cr. should have been the right figure instead of what’s reported as -38.22 cr.

image
image1597Ă—907 99.1 KB

2 Likes