Auto component manufacturer Divgi TorqTransfer Systems’ initial public offering (IPO) would open for subscription on March 1, 2023. The three-day initial share sale would conclude on March 3. The IPO comprised a fresh issuance of equity shares aggregating up to Rs 180 crore and an offer for sale (OFS) of up to 39,34,243 equity shares by investors and other selling shareholders, according to the red herring prospectus (RHP).
As part of the OFS, NRJN Family Trust (investment company started by Infosys co-founder and non-executive chairman Nandan Nilekani), Oman India Joint Investment Fund II, Bharat Bhachandra Divgi, Sanjay Bhalchandra Divgi, Ashish Anant Divgi, Arun Ramdas Idgunji and Kishore Mangesh Kalbag would offload shares.
NRJN has an 8.70 per cent shareholding in the company or 23.94 lakh shares, including a purchase of 11.97 lakh shares on February 18 last year. As per the RHP, the Nilekani family trust owned is offloading 14.41 lakh shares. Post-offer, NRJN would hold 9.53 lakh shares.
The average cost of acquisition per equity share for Nilekani’s firm came at Rs 125.28, the RHP showed. And, the price band of the IPO is Rs 560-590 apiece. This implies that considering the lower price band of Rs 560, given the weak market scenario, NRJN is expected to get multibagger return of at least 346.99 per cent. At a higher price band of Rs 590, the family trust could fetch up to 370.94 per cent gains.
Divgi TorqTransfer said that net proceeds from the initial share sale would be utilised towards funding capital expenditure requirements.
Investors can make a bid of a minimum of 25 equity shares with each lot costing Rs 14,750. The company is likely to get listed on March 14, 2023.
“Divgi has delivered impressive top and bottom-line growth. The company’s steadily increasing EBITDA margins, which are currently around 28 per cent, appear appealing. The IPO was priced at 36x PE based on post-issue annualised FY23 earnings, which appears to be moderately priced in comparison to its listed peers. However, given the current state of the market, it will be definitely interesting to see the response it garners from the investors,” said Manan Doshi of UnlistedArena.com, dealing in unlisted & pre-IPO shares, told Business Today.
“Even though Divgi Torqtransfer has negligible debt, its IPO price band makes the company valuation very overpriced considering profitability has dropped and given the sector facing margin pressure. Investors should wait for a dip post listing to buy at better valuations,” said AR Ramachandran from Tips2trades.
Mahindra & Mahindra, Tata Motors and Toyota Kirloskar Auto Parts are among the company’s customers. It also operates in the UK, the USA, China, Thailand, Korea and Japan.
The company manufactures manual transmissions, DCT, transfer cases, torque couplers & auto-locking hubs (ALH), essential components for 4WD/ AWD vehicles, Synchronizers for transmissions (gearboxes) and components. It mainly caters to the passenger and small commercial vehicle industry.
In addition, it is venturing into EV (Electric Vehicle) transmissions. The company has manufacturing facilities in Bhosari and Shivare in Pune and Sirsi in Karnataka.
Inga Ventures and Equirus Capital are the book-running lead managers to the issue. The equity shares are proposed to be listed on BSE and NSE.
On the earnings front, the firm reported revenue of Rs 233.78 crore in fiscal 2022 against Rs 186.58 crore a year ago. Net profit for the mentioned year came at Rs 46.15 crore, over Rs 38.04 crore in the same period a year ago.
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