New Delhi: The Rs 755-crore initial public offering (IPO) of Harsha Engineers International (HEIL) kicked off for subscription on Wednesday, September 14. The IPO will remain open till Friday, September 16.
The company is selling its shares in the range of Rs 314-330 apiece. It is offering a discount of Rs 31 per equity share to its eligible employees. The lot size for the issue has been fixed at 45 equity shares.
The IPO consists of the issuance of fresh equity shares worth Rs 455 crore, whereas existing shareholders and promoters will offload shares worth Rs 300 crore via offer for sale (OFS).
As part of the OFS, Rajendra Shah will offload shares worth up to Rs 66.75 crore, Harish Rangwala up to Rs 75 crore, Pilak Shah up to Rs 16.50 crore, Charusheela Rangwala up to Rs 75 crore and Nirmala Shah up to Rs 66.75 crore.
The net proceeds from the fresh issue will be utilised towards paying debt of Rs 270, purchase of machinery worth Rs 77.95 crore, infra repairs of over Rs 7 crore and renovation of the existing facilities, along with general corporate purposes.
The company has reserved 50 per cent of the net offer for qualified institutional buyers, and 15 per cent for non-institutional investors. Retail bidders will get 35 per cent of the net offer.
Harsha Engineers raised Rs 225.75 crore from global and domestic anchor investors by allotting 68.4 lakh equity shares at Rs 330 apiece, the company said in a regulatory filing.
American Funds Insurance, Goldman Sachs, Pinebridge Global Funds, and Abu Dhabi Investment Authority, Whiteoak Capital and multiple domestic mutual funds participated in the anchor book.
Harsha Engineering offers a diverse suite of precision engineering products across geographies and end-user industries, including automotive, aviation and aerospace, railways, construction, mining, renewable energy, agriculture and more.
The company claims to have 50 per cent market share in the organised segment of the Indian bearing cages market and 5.2 per cent market share in the global organised bearing cages market for brass, steel and polyamide cages in the year 2020.
The company, which serves in more than 25 countries, recorded a profit of Rs 91.94 crore on revenue of Rs 1321.48 crore for the year ended March 2022, as against Rs 45.44 crore and Rs 876.73 crore in the year-ago period, respectively.
, Equirus Capital and are lead managers to the issue, whereas Link Intime India has been appointed as the registrar to the issue.
The majority of the brokerages remain positive on the issue and suggest subscribing to it. However, a few have flagged rising prices of raw materials and dependency on major clients as key concerns.
Here’s what the brokerages said about the initial public offering of Harsha Engineers International:
- Nirmal Bang Equity Research
HEIL is a proxy play on rising global outsourcing of bearing components from in-house facilities of clients in Europe and US to India, relocation of global supply chains from China to India, strong upturn in domestic industrial and auto segments reflecting in strong growth outlook provided by bearing clients.
“With increasing utilization rates, turnaround in solar EPC business and debt being repaid, we expect ROCE to improve to 20 per cent levels in a couple of years,” it said with a subscribe rating on the issue citing its quality of business, industry positioning and cash flow generation.
Rating: Subscribed for listing gains
HEIL with its dominant position is well placed to capture the growing bearing cage demand across industries. It is increasing focus on other specialized precision components and on the growing EV segment which could boost its EBITDA margins.
“It is valued at 32.7x FY22 P/E which is at par with its listed peers. Given growth recovery in auto and ancillary and strong momentum in the midcaps, we expect the IPO to do well,” it added with a ‘subscribe for listing gains’ recommendation.
On the financial front, the company’s track record has seen improvement in the last 3 years while its revenue and PAT have seen a CAGR of 22 per cent and 105 per cent over FY20-22.
It has a neutral rating on the issue as limited numbers of customers and price volatility of raw materials may impact margins.
Rating: Subscribed for long term and listing gains
“On the valuation front, the company is available at 27.73x PE for FY22 on diluted EPS of Rs 11.90 which appears to be attractive as compared to industry peers. On the back of the company’s strong position in the bearing cages industry along with healthy return ratios, we recommend subscribing the issue for listing as well as long term,” it said.
- Choice Broking
At the higher price band, HEIL is demanding EV/Sales multiple of 2.2x, which is a discount to the peer average of 5.6x. Above peer list includes large well-established bearing manufacturers, which are trading at higher valuations thereby distorting the peer average.
Considering the future growth outlook of the bearing market, the brokerage assigned a ‘subscribe’ rating to the issue.
- BP Equities
Rating: Subscribed for long term and listing gains
The general rise in the global economy and a rise in the technological advancements in the bearing cage manufacturing business provide it with strong support to further grow in global markets. The company has a stronghold in India and long-standing relationships with leading clientele supplying to the top-6 global bearing manufacturers.
The wide application of bearings growing in different sectors coupled with substantial government initiatives to promote the manufacturing sector is a robust driver for the company, it said with a subscribe rating for the long term as well as for the listing gains.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)