The initial public offering (IPO) of Divgi TorqTransfer Systems continued to get a decent response from the investors on the second day of the bidding process. The issue majorly attracted the retail bidders, whose portion sailed through on day two.
Pune-based Divgi TorqTransfer Systems is engaged in the business as an automotive component entity. Its IPO is open for subscription between March 1-3, 2023, as the company is looking to raise Rs 412 crore by selling its shares in the range of Rs 560-590 apiece.
According to the data from BSE, investors made a bid for 8,85,400 equity shares, or 0.23 per cent, against a total of 38,41,800 equity shares offered by the company, as of 14.15 hours on Thursday, March 2023.
The portion reserved for retail bidders was subscribed 1.10 times, whereas allocation for non-institutional investors (NIIs) was booked 11 per cent. However, the quota for qualified institutional bidders was not even off the mark as of the given time.
Analysts tracking the issue are majorly positive on it and suggest investors to subscribe for it for a longer-term perspective. However, they have flagged a few concerns including client concentration on a few big names and high dependence on imports for materialsrial as the key risk for the issue.
At the upper end of the price band of Rs 590, the IPO is valued at P/E of 35.16x at H1FY23 diluted annualised EPS and at a P/E of 39.1x which we believe is reasonable considering the opportunity in the sector and strong fundamentals of the company, said Ajcon Global Services.
“We recommend investors to ‘subscribe’ to the issue on the back of factors such as one of the very few suppliers in India having the capability to develop and provide system level transfer case, torque coupler, DCT solutions and transmission systems for EVs across a wide array of automotive vehicles and geographies, with leadership across select product categories,” it said.
Divgi Torqtransfer Systems allotted 31,43,290 equity shares to 12 anchor investors at Rs 590 per share aggregating to about Rs 185.45 crore, the company said in a circular on BSE. Anchors include Matthews Asia Funds, Aurigin Master Fund, ICICI Prudential, Motilal Oswal and some other mutual funds and insurance companies.
Domestic brokerage firms Hem Securities and Anand Rathi believe that the company is fairly priced and recommend a ‘Subscribe for long term’ rating to the IPO.
It is one of the rare auto ancillary businesses where EBITDA margin is more than 25 per cent, PAT margin is more than 19 per cent and generates healthy mid-teens return ratios, said SBI Securities. “We recommend investors to subscribe the issue at a cut-off price with a long-term investment horizon,” it said.
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