UniParts India IPO Opening Tomorrow, Should You Subscribe?

UniParts India Limited IPO is opening on Wednesday, 30 November 2022 and will close on Friday, 2 December 2022. The IPO will be open for 3 days for bidding. This is a pure offer for sale (OFS) with a company receiving no proceeds from the IPO. The company wants to achieve the benefits of listing Equity shares on stock exchanges.

Leading brokerage firm ICICI Direct has published a report on UniParts India IPO. Below are the details of the report:

IPO Details & Shareholding Pattern

IPO Details
Issue Size	₹ 835 crore
QIB (Institutional) Share	50% of issue
Non-Institutional Share	15% of issue
Retail Share	35% of issue
Issue Type	OFS
Price Band (₹/share)	₹ 548-577
Market Lot	25 shares
Face value (₹/share)	₹10.00
"Listing Market Cap @ Upper price band
"	~₹ 2,600 crore

Shareholding Pattern

Shareholding	Pre-Issue	Post-Issue
Promoters	75.5	65.8
Public	24.5	34.2
Total	100	100

 

About the company

UniParts India (UPI), incorporated in 1994, is a leading supplier of systems and components for the off-highway market in the agriculture and construction, forestry and mining and aftermarket sectors. It has presence in over 25 countries. UPI has 6 manufacturing facilities (5 in India, 1 in USA).

Business Updates

Its key product includes 3-point linkage systems (3PL) & precision machined parts (PMP) which together constitute over 90% of its sales. It also manufactures adjacent products like Hydraulics, PTO & fabrications.

In terms of value, as of FY22, UPI has an estimated 16.7% market share of the global 3PL market and an estimated 5.9% market share in the global PMP market in the CFM (construction, forestry and mining) sector.

 

Key triggers/Highlights

• Leading market presence in critical vehicle systems & components space catering to global off-highway segment (tractors, construction equipment).
• Engineering driven, vertically integrated precision solutions provider.
• Strategically located manufacturing & warehousing units across the globe to ensure seamless delivery of its products that offer scale & flexibility.
• Long term relationship with key customers including global OEM's with outside India sales constituting ~80%+ of its sales.
• Healthy financials: Double digit EBITDA margin (~22%) and Return ratios profile (RoCE >25%) with Debt: Equity at 0.2x as of FY22.

 

Should You Subscribe?

Sales/PAT at UPI has grown at a CAGR of 16.3%/63.2% respectively over FY20-22, led by impressive improvement in EBITDA margin profile. UPI clocked EBITDA margins of 21.8% in FY22 with RoCE placed at ~27%. At the upper end of the price band it is valued at ~15.6x P/E on FY22, which we believe is reasonable given the healthy financials at the company and high single digit growth prospects across its key serving segments (3PL and PMP). "We assign SUBSCRIBE rating on UPI amidst healthy financials, precision component product profile and inexpensive valuations," ICICI Direct has said.

 

Key risk & concerns

• Segment concentration risk with agriculture and CFM segments together constituting ~95% of revenues as of FY22.
• Product concentration risk with 3PL and PMP constituting over 90% of sales.
• High share of international sales (>80%) making it susceptible to foreign currency risks as well as exposed to global macro uncertainty.
• Low growth (single digit CAGR) prospects in the base 3PL & PMP business.

Disclaimer

The Information has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.