Harsha Engineers IPO Begins: Should You Subscribe?

Harsha Engineers IPO Begins: Should You Subscribe? – Mail Bonus


New Delhi: The Rs 755 crore initial public offering (IPO) of Harsha Engineers International (HEIL) began for subscription on Wednesday, September 14. The auction will be open until Friday, September 16.

The company sells its shares in the range of Rs 314-330 apiece. It is offering a discount of Rs 31 per share to eligible employees. The portion size of the release has been set at 45 portions.

The offering consists of issuing new shares worth Rs 455 crore, while existing shareholders and promoters will surrender shares worth Rs 300 crore through an offer for sale (OFS).

As part of OFS, Rajendra Shah will hand over 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 7 crores.

Net proceeds from the new issue will be used to pay off Rs 270 crore of debt, buy machinery worth Rs 77.95 billion, renovate over Rs 7 billion and refurbish existing facilities, along with general corporate purposes.

The company has reserved 50 percent of the net offer for qualified institutional investors and 15 percent for non-institutional investors. Retail bidders receive 35 percent of the net bid.

Harsha Engineers raised Rs 225.75 crore from international 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 many domestic mutual funds participated in the anchor book.

Harsha Engineering offers a wide range of precision engineering products across geographies and end-user industries, including automotive, aerospace, rail, construction, mining, renewable energy, agriculture and more.

The company claims to have a 50 percent market share in the structured segment of the Indian cage market and a 5.2 percent market share in the global cage market for copper, steel and polyamide cages by 2020.

The company, which operates in more than 25 countries, posted a profit of Rs 91.94 crore on revenue of Rs 1321.48 crore for the year ended March 2022, against Rs 45.44 crore and Rs 876.73 crore in the same period a year ago.

Equirus Capital and are the lead managers of the issue, while Link Intime India has been appointed as the registrar of the issue.

The majority of brokers are positive about the issue and suggest to subscribe to it. However, several have pointed to rising raw material prices and dependence on key customers as major concerns.

Here’s what the brokers said about Harsha Engineers International’s IPO:

  • Nirmal Bang Stock Research

Rating: Subscribe
HEIL is a proxy play on the growing global outsourcing of structural components from customers’ own facilities in Europe and the US to India, the relocation of global supply chains from China to India, a boom in domestic industrial and automotive parts reflected in strong growth prospects. by carrying customers.


“With increased utilization rate, turnaround in solar EPC business and debt repaid, we expect ROCE to improve to 20 percent in a few years,” it said in a subscription rating for the issue citing the quality of its business, an industry benchmark. and cash flow generation.

Rating: Subscribed to Listing Profits
HEIL with its market dominant position is well positioned to meet the growing demand for carrier cages in industries. It is increasing its focus on other specialty precision components and on the growing electric vehicle segment, which could boost its EBITDA margins.

“It is valued at 32.7x FY22 P/E which is on par with its listed peers. Given the recovery of growth in auto and accessories and strong momentum in mid-caps, we expect the IPO to do well,” it added with “subscription for recommendations for recording profits.

Rating: Neutral
On the financial front, the company’s track record has improved over the last 3 years while its revenue and PAT have seen a CAGR of 22 percent and 105 percent over FY20-22.

It has a neutral rating for the issue as a limited number of customers and fluctuations in raw material prices can affect margins.

Rating: Subscribed to long-term and listing profits

“On the valuation side, the company is available at 27.73x PE for FY22 on diluted EPS of Rs 11.90 which appears to be attractive compared to industry peers. Backed by the company’s strong position in the cage industry coupled with healthy yield ratios, we recommend it to subscribe to the publication for record as well as long-term,” it said.

Rating: Subscribe

At the higher price range, HEIL requires an EV/Sales multiple of 2.2x, which is a discount to the peer average of 5.6x. The above peer list includes large well-established bearing manufacturers, which trade at higher valuations, thereby skewing the peer average.

Based on the future growth prospects of the carrier market, the brokerage has assigned a “subscription” rating to the issue.

Rating: Subscribed to long-term and listing profits
The general increase in the world economy and the increase in technological progress in the production of the cages provide it with strong support to grow further in the international markets. The company has a stronghold in India and longstanding relationships with leading customers supplying top 6 bearing manufacturers globally.

The widespread use of bearings growing in different sectors coupled with significant government initiatives to boost the manufacturing sector is a strong driver for the company, it said with a subscription rating in the long term as well as for the listing gains.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of Economic Times)


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