The initial public offering (IPO) of Divgi TorqTransfer Systems was booked 12 per cent on the first day (Day 1) of issuance. The retail individual investors’ (RIIs’) category got a 60 per cent subscription, while the non-institutional investors’ (NIIs’) portion was booked 6 per cent. The qualified institutional buyers’ (QIBs’) category got nil subscriptions as of 5 pm on Wednesday. Divgi is the first mainboard IPO of 2023.
The IPO received 4,75,800 bids today against the issue size of 38,41,800 shares on Day 1. The auto component manufacturer’s three-day initial share sale would conclude on March 3. The price band has been fixed at Rs 560-590.
Ahead of the IPO, Divgi has raised around Rs 185 crore from anchor investors. The IPO comprises a fresh equity issue worth Rs 180 crore and an offer for sale (OFS) of 39.34 lakh shares by investors and other selling shareholders.
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. Of which, the Nilekani family trust owned is offloading 14.41 lakh shares. Post-offer, NRJN would hold 9.53 lakh shares. This implies that considering the higher price band of Rs 590, the family trust could fetch up to 370.94 per cent gains compared to an average cost of acquisition per equity share of Rs 125.28.
Grey market premium
“The grey market premium (GMP) of Divgi TorqTransfer is observed at Rs 65 as on March 1, 2023 as per the market sources. The expected listing price could be Rs 655 (upper band price of Rs 590 plus the GMP). The IPO can give listing gains of up to 11 per cent,” said Manish Khanna, co-founder of Unlisted Assets.
Brokerage view
“The company’s strategically located manufacturing facilities are capable of producing high-precision components meeting system-level design intent. Also, it enjoys long-term relationships with marquee domestic and global customers along with consistent financial performance, with a focus on innovation and R&D capabilities. Hence, we recommend ‘Long Term Susbcribe’ on the issue,” Hem Securities stated.
“Divgi is one of the few Indian companies to have served both systems-level solution providers and component kit suppliers to global OEMs and Tier-I transmission systems suppliers. The management is experienced with thirty-plus years of experience in the automotive industry. They offer turnkey solutions and components to automotive OEMs across India, the USA, China, Korea, Russia and others. They cater to a domestic and global clientele of marquee customers,” Angel One said. The brokerage, however, didn’t assign a rating.
“The company’s top and bottom line has been increasing with a decent growth rate in recent years with the help of its strong and established relationships with several marquee domestic and global OEM. We assign a ‘Subscribe with caution’ rating for the issue,” Choice Broking said.
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.
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.
Divgi has recorded a profit of Rs 46.15 crore for the quarter that ended March FY22, a growth of 21.30 per cent over the previous year. Revenue from operations for the year stood at Rs 234 crore, up 25.30 per cent from the previous financial year, including Rs 213.40 crore of income from its top five customers.
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