Hero Group’s chip design unit Tessolve mulls IPO in 3-4 years

“An IPO is definitely on the table, not right now but in three, four years from now," he said in response to a question on whether the company was preparing for a public listing. He did not share the quantum of shares that the company may look at offering up for public ownership or the amount of funds the company may look to raise from the market.

Tessolve is looking to raise funds for acquisitions and future growth, and is seeing interest from global private equity funds willing to invest in the company, he said.

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“We are in discussions right now, but we’ve not decided either way. We are high-growth, cash-flow positive company, but to accelerate the growth and making more acquisitions, we might look at raising more funds," he added, noting that the next fund-raise will be much larger than its last one.

Company considering more buyouts

The company raised $40 million from Singapore-based private equity firm Novo Tellus Capital Partners, at a $100 million valuation in 2021, and used the funds for acquisitions and expansions. It is considering more buyouts, including one that is close to completion in Europe, to enhance capabilities and geographic reach, the top executive said, without revealing details.

The Hero Group-owned company, which designs, tests and produces semiconductor chips in 10 countries for 80% of the world’s 20 largest semiconductor firms, is expanding operations globally. It recently opened labs in the US, Singapore and India, and plans centres in tier-II cities across states.

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“So far, our market has been outside of India for these test product engineering, but now with India initiatives, that opens up a new market for us. We are expanding our footprint within India and globally, and we also setting up labs," Chinamilli said, adding that it could bring some of the advanced manufacturing, products and expertise to India from global labs that were working on cutting-edge technology.

“Our key initiative in India is to set up centres in second-tier cities. We have a successful training programme with over 5,000 engineers trained in collaboration with universities to develop talent," he said. The company has already expanded in Bengaluru centre to three times the size but it is in discussions with several state governments that have approached it to set up centres.

Having closed FY24 with ₹1,000 crore revenue, it expects to grow 20% in FY25 on the back of demand coming from India where several companies are setting up testing and packaging units, besides the first fabrication unit being set up by Tata Electronics.

“All these units are talking to us because we’ve been building the infrastructure for the last 20 years, so they don’t have to look at any other service providers outside of India for this kind of expertise," Chinamilli added.

Tessolve’s solutions help semiconductor manufacturing and packaging companies to accelerate their products to market, as it removes the need for them to make their own investments into design, engineering and testing chips that may be used in a variety of sectors including automotive and power management, besides those used in artificial intelligence (AI) applications, electric vehicles and data centres.

Chinamilli said that the geopolitical factors were also contributing to the company’s growth, besides sectors like AI and automation, since companies were looking at alternatives to China for engineering and manufacturing. “We've been very early in India, having invested here for the last 20 years, so we’re benefiting from that."

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