Harsha Engineers IPO Opens On Sept 14, Check Price Band, Size, Valuation & Other Details

Harsha Engineers International's initial public offering (IPO) will open for subscription on September 14, and it will close on September 16, 2022, the company informs. The Issue Size of the IPO will be Rs. 7.6bn IPO, consisting of a fresh issue of Rs. 4.6bn and OFS of Rs. 3bn by promoters, which would result in latter's stake reducing to 74.6% post-IPO. The market capitalization post-listing will be Rs. 30.1bn.

The company is now aims to raise Rs. 455 crore via fresh issue of shares and up to Rs. 300 crore via an offer for sale. The price band for the equity shares is Rs. 314-330. Motilal Oswal is suggesting to Subscribe Harsha Engineers International Ltd. (HEIL) for Listing Gains. Funds raised would be used to repay Rs. 2.7bn debt, fund Rs. 0.8bn capex while balance would be utilized towards general corporate purpose.

Valuation

According to Motilal Oswal, "HEIL with its dominant position is well placed to capture the growing bearing cage demand across industries. We like its 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/auto ancillary and strong momentum in the midcaps, we expect the IPO to do well. We suggest investors to Subscribe for listing gains."

Growth expectations

Bearing cage has wide usage across fast growing end user industries viz. Auto, Aviation, Railways, Construction, Mining, Electronics, Agriculture. Global/ domestic industry is expected to grow at 6.4%/8.3% CAGR over CY21-29E, with increasing outsourcing by bearing companies. HEIL, manufacturing upto 2000mm diameter cages, has expanded into large diameter brass/steel cages, which is largely manufactured in-house by bearing companies, the brokerage firm stated.

Diversification into specialized precision components to drive growth: HEIL has recently diversified into production of bronze bushings, sand casting and specialized stamped components to cater to end-user industries like wind, mining and shipping. It plans to scale up this low volume, high value segment over next 3-5 years.

Harsha Engineers - financial results

The company's revenue grew by 51% in FY22 (though flat in FY21) as many new orders won over FY20-21 started reflecting in FY22. Revenue/ EBITDA/PAT grew at 22%/40%/105% CAGR over FY20-22. EBITDA margin expanded to 13.9% in FY21, led by high value and margin accretive orders but dropped to 12.8% in FY22 led by raw material inflation. Return ratios have improved with RoE/RoCE expanding to 13.1%/11.7% (post dilution).

Company profile

Harsha Engineers International Ltd (HEIL) is the largest manufacturer of precision bearing cages in India (brass/steel/polyamide) with 50-60% market share in the organized market. It is also one of the leading players globally with market share of 6.5% for brass, steel and polyamide cages in CY21 (forming 75% of global bearing cage requirement). It caters to each of the top six global bearing companies and derives 75% revenue from this segment.

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, and the author are not liable for any losses caused as a result of decisions based on the article. This article only incorporates the recent stock-related information about the companies.