Harsha Engineers IPO: Latest GMP; know more about allotment, listing

Market


Harsha Engineers International IPO was oversubscribed by 74.70 times on the last day of the public offer. Qualified institutional buyers (QIB) made the highest bidding in the IPO followed by high-net worth clients. Retail investors also showed strong demand for the IPO. On Sunday, in the grey market, the IPO is trading at 240. The company will complete the process of allocating shares to bidders within six working days from the closing day of the IPO.

Harsha Engineers IPO GMP

In the grey market, the Harsha Engineers IPO has a GMP of 240 per equity share currently. A grey market is where a company’s shares are offered unofficially to traders.

With a GMP of 240 per share, Harsha Engineers is expected to list at a premium of 570 per share (upper price band of 330 apiece plus 240 per share GMP).

Harsha Engineers IPO allotment

In its red herring prospectus, Harsha Engineers stated that the “Company is required to complete allotment pursuant to the Offer within six working days from the Bid/Offer Closing Date.”

That said, Harsha Engineers is expected to allot shares to eligible bidders in the IPO, on September 21.

The company is likely to make its market debut on September 26, 2022. It will be listed on both NSE and BSE.

Harsha Engineers IPO

Harsha Engineers launched its initial public offer (IPO) for raising 755 crore. On Day 3, the IPO was oversubscribed by a massive 74.70 times. The portion reserved for QIBs oversubscribed by a whopping 178.26 times, while the portion for the NII category (HNIs) subscribed by 71.32 times. The reserved portion for retail individual investors was oversubscribed by 17.63 times.

The IPO has a price band of 314 and 330 per equity share.

Growth outlook!

Harsha Engineers is the largest manufacturer of precision bearing cages, in terms of revenue, in organised sector in India, and among the leading manufacturers of precision bearing cages in the world. The company offers diversified suite of precision engineering products across geographies and end-user industries.

It has approximately 50-60% of the market share in the organised segment of the Indian bearing cages market and 6.5% of the market share in the global organised bearing cages market for brass, steel, and polyamide cages in CY 2021.

In FY22, the company’s revenue registered a strong growth to 1,321.5 crore versus 873.7 crore in FY21 and 885.8 crore in FY20. PAT climbed to 91.9 crore in FY22 against 45.4 crore in FY21 and 21.9 crore in FY20. As of March 31, 2022, the company’s EBITDA and PAT margin stood at 14.1% and 6.9% respectively.

In its IPO note, KR Choksey in its report stated earlier that “We believe the company’s long-term prospects are favorable, given long-standing relationship with key industry players. The company enjoys a healthy market share of 50-60% in the Indian organized precision bearing cages market. The company has healthy return ratios and good earnings visibility going ahead.”

Further, in its IPO note, Ventura Securities had said, “We are expecting HEIL’s revenue/ EBITDA/ PAT to grow at a CAGR of 17.2%/ 22.7%/ 32.1% to 2,125 cr/ 313 cr/ 212 cr respectively over FY22-25E, while EBITDA and PAT margins are expected to improve by 191bps (to 14.7%) and 301bps (to 10.0%) respectively over the same period. Subsequently, RoIC is expected to improve by 586bps to 21.5% by FY25.”

In its note, Ventura Securities also explained a bull and bear case scenario for the company based on the company’s FY25 revenues and PAT margins estimates.

In the bull case, Ventura’s note said, “We have assumed FY25 revenues of INR 2,400 cr (FY22-25 CAGR of 22.0%) and PAT margin of 10%, which will result in a Bull Case price target of 461 per share (an upside of 39.7% from IPO price).

In the bear case, the note said, “We have assumed FY25 revenues of INR 1,800 cr (FY22-25 CAGR of 10.9%) and PAT margin of 8.0%, which will result in a Bear Case price target of 277 per share (a downside of 16.1% from IPO price).”

On stock exchanges, Harsha Engineers will compete against listed firms like Timken India, SKF India, Rolex Rings and Sundaram Fasteners.

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