(i) Engineering business- It manufactures bearing cages (in brass, steel, and polyamide materials), complex and specialized precision stamped components, welded assemblies, brass castings, and cages & bronze bushings. The Issuer has 50-60% of the market share in the organized segment of the Indian bearing cages market and 6.5% of the market share in the global organized bearing cages market for brass, steel, and polyamide cages in FY 21.
Bearing cages are used in the automotive, railways, aviation & aerospace, construction, mining, agriculture, electrical and electronics, renewables sectors, etc. The company manufactures bearing cages, semi-finished brass castings, specialty stamping components, and bronze castings and bushings.
(ii) Solar EPC business- Under this, it provides comprehensive turnkey solutions to all solar photovoltaic requirements. Revenue from solar EPC business aggregated to ? 82.95 crores (FY22), ? 54.19 crores (FY21), and ? 64.19 crores (FY20) respectively contributing 6.28%, 6.20%, and 7.25% respectively to total revenue from operations. The Issuer has an in-house design, engineering, procurement, project management, and O&M team with a combined experience of installing at least 500 MW and more than 60 MW commissioning experience in the rooftop segment as of March 31, 2022.
The financial profile of Harsha Engineering seems to be strong with a consistent growth in its revenues and profits after taxes. The profitability margins are also adequate and show an increasing trend in the last three fiscals.
The total revenue from operations increased by 51% to Rs 1321.48 crore during FY22 from Rs 873.75 crore for FY21. This was due to increase in sale revenues. PAT also doubled to Rs 91.94 crore in FY22 from Rs 45.44 crore in FY21. For FY21, the revenues had fallen marginally by 1.37% to Rs 873.75 cr due to the pandemic effect. However the PAT increased to Rs 45.44 crore in FY21 from Rs 21.91 crore during FY20.
The profitability margins are reasonable as can be seen from the below table.
The Issuer has a negative free cash flow for FY22 being Rs (25.26 crore). Debt to equity ratio is 0.78x (FY22) which is at a higher side, though the company plans to prepay its debt with IPO proceeds.
|Revenue from operations||1321.48||873.75||885.85|
|Cash flow from operating activities||36.47||121.16||112.91|
The IPO is valued at 20.55 times with earnings of 16.06 (EPS FY22) calculated at the upper price band of Rs 330 per share. Valuations appear to be reasonable when compared to its peers which are operating at an industry average P/E of 50.98 x as per the RHP. The Issue price is 4.83 x its NAV of 63.84 for FY22.
Timken India, SKF India, Rolex Rings, and Sundaram Fasteners are the peers of the Issuer and their key comparatives can be seen in the peer comparison table.
|Particulars||Timken||SKF India||Rolex Rings||Sundaram Fasteners|
|Total Income for FY22 (Cr)||2,217.53||3,700.29||1,028.13||4,941.4|
|NAV per share||220.28||381.43||200.05||124.75|
|Return on net worth||19.74%||20.95%||24.21%||17.42%|
|P/E (12 Sep 22)||65.15||54.41||35.58||36.52|
|Current market value||3,363.2||4,900||1,976.45||883.3|
Harsha Engineering IPO (Rs 755crore; fresh issue, Rs 455 crore) opens on 14th Sept- 16th Sept 2022 with a price band of 314-330 per share. The retail quota is 35% and investors can apply with a minimum bid of 45 shares (Rs 14,850). Maximum lot size is 585 shares (Rs 1,93,050). The objects of the offer include prepayment of debt (Rs 270 crore), CAPEX (Rs 77.95 crore), and Repairs for existing production facilities (Rs 7.12 crore).
Harsha Engineering has a strong market share in India (60%) and globally (7%) and offers a wide range of products in its engineering vertical. The company has plans to expand in the next two to three years. Its product, the bearing shaft has uses in varying sectors like automobiles, industrial applications, electrical power generation, and machine tool operation thus finding use in sectors like construction, aviation, railways, and many others.
The limiting factor that appears is that there is a revenue concentration risk as the majority of the revenues is contributed by five top customers and relatively high leverage that may come down with prepayment.
The Issuer has a strong business and satisfactory financial profile as seen from its improving financial metrics. Hence, one may subscribe for listing gains. It is worth here to mention that Rolex Rings, Issuer&rsquo's peer engaged in a similar type of business, was listed in the year 2021 at a premium of 39% (listed at Rs 1250 against its issue price of Rs 900) and currently trading at Rs 1976 per share (12th Sept. 2022). This is quoted here just to chalk out a reference.
Review By CA Priyanka Choudhary on 22nd Aug 2022
About CA Priyanka Choudhary
Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.
Email: [email protected]
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.
No feedback found for this broker. Be the first to post the review.
Free Delivery for Lifetime
Flat ₹15 Per Trade in F&O
Rs 0 Demat AMC
FREE Account Opening (
Trade at Flat ₹20 per Trade Pay-as-you-go Demat AMC
Flat ₹20 Per Trade
Free Trading Tips & Software