The drought of mainboard IPOs in 2023 looks to be coming to an end as the initial public offering of automotive component maker Divgi TorqTransfer Systems will be opened for public subscription on March 1 until March 3, 2023. price band has been set 560-590 a share. The company said on Tuesday that it has raised more than 185 crores from anchor investors before its issue.
Divgi TorqTransfer Systems IPO New issues of equity shares include An offer for sale (OFS) of 180 crore and 39.34 lakh shares by investors and other selling shareholders.
The proceeds from the new issue will be used for funding capital expenditure requirements for its manufacturing facilities and purchase of equipment for general corporate purposes.
According to market observers, Divgi TorqTransfer Systems shares are earning a premium (GMP) Of 60 in the gray market. The equity shares of the company are expected to be listed on BSE and NSE stock exchanges on March 14.
“Based on strong financials, their business model is backed by a consistent track record of revenue growth and profitability with a CAGR of 21.23% and 28.30% between FY 2020-22. Valuation based on FY22 data From the perspective, the issue appears to be attractively priced compared to its listed counterparts. However, the business has high customer concentration risk (91% of revenue comes from top 5 customers and 54% is generated from 1 customer) Furthermore, overseas sales are dependent on China and Russia which exposes the company to risks of geographic concentration. With favorable future growth potential in the long run, we recommend investors to “subscribe” to IPOsaid Parul Sharma, Research Analyst, Samco Securities.
Divgi is an automotive components unit that develops and supplies system-level transfer cases, torque couplers and dual clutch automatic transmission (DCT) solutions. It has three manufacturing and assembly facilities located across India.
“Divgi has registered impressive growth in both top and bottom line. The company’s ever-increasing EBITDA margin, which currently stands at around 28%, looks attractive. Divgi TorqTransfer Systems IPO is priced at 36 times PE based on annualized FY23 post issue earnings, which is marginally priced compared to its listed peers. However, it will be interesting to see how it reacts amid volatile market sentiments,” said Abhay Doshi of Unlisted Arena.
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