Harsha Engineers IPO GMP, Subscription, Key Risks; Should You Buy on Last Day?


Harsha Engineers IPO Last Day to Subscribe: Harsha Engineers International’s initial public offering (IPO) opened on Wednesday, September 14 for subscription and will close on Friday, September 16. The applicants also must note that the cut-off time for UPI mandate acceptance is Friday, September 16, 2022, upto 5:00 pm, the last day of IPO bidding. If they fail to do so then their application may not be considered. The public offer received bids for 17,45,50,545 shares against 1,68,63,795 shares on offer, according to data available with the NSE.

Harsha Engineers IPO: Subscription Status

The category for non-institutional investors got subscribed 24.91 times, while the portion for Retail Individual Investors (RIIs) received 9.14 times subscription. The quota for Qualified Institutional Buyers (QIBs) got subscribed 1.63 times.

Harsha Engineers IPO: About the Subscription

The Initial Public Offer (IPO) of Rs 755 crore has a fresh issue of up to Rs 455 crore and an offer for sale of up to Rs 300 crore.

Price range for the offer has been fixed at Rs 314-330 per share.

Proceeds from the fresh issue to the tune of up to Rs 270 crore will be utilised for debt payment, up to Rs 76 crore for funding working capital requirements towards purchase of machinery, up to Rs 7.12 crore for infrastructure repairs and renovation of the existing production facilities and for general corporate proposes.

Harsha Engineers IPO: Key Risks

Motilal Oswal and Religare mentioned in their reports that the biggest risk for HEIL is that it depends on a limited number of customers for revenue. HEIL derives nearly 71 percent of revenue from the top five customer groups as of FY22. The company also has an unsecured loan of Rs 73.5 crore, which is 19 percent of the total borrowings, said Motilal Oswal.

Further, according to Religare, the price volatility of raw materials may impact HEIL margins.

Harsha Engineers IPO: Valuation

“HEIL’s upper band price is Rs 330 — it is valued at 27.7 times its fiscal 2022 earnings of Rs 11.9 which in our view is reasonable compared to its peers,” said Arihant Capital, with a ‘subscribe’ call on the IPO. Religare has a neutral call on the HEIL IPO.

Harsha Engineers IPO: Should you Buy?

LKP Securities, said: “HEI has established a strong relationship with its customers who are leading global bearing makers across sectors. The bearing cages market globally is concentrated with top-6 players commanding a 54 per cent market share in FY22. As of March 31, HEIL supplied to each of these six companies. The company’s top 10 customers have contributed 45-48 per cent to its total revenues over the last 3 financial years. It also enjoys a long-term relationship with its clients.”

At the upper end of the price band of Rs 330, it is valued at 27.7x FY22 earnings, which is reasonable compared to its peers, it added.

Giving the public offer a neutral rating, Religare Broking expects the company to benefit from an increase in outsourcing for bearing cages by global companies. It estimates the global market to grow at a CAGR of 6-8 per cent over 2021-2029. Moreover, the firm has plans to enhance its market leadership in the bearings segment as well as capture opportunities in auto-EV segment, which has a good scope for growth.

The company has five manufacturing facilities, with two of its principal manufacturing facilities at Changodar and one at Moraiya, near Ahmedabad in Gujarat, and one manufacturing unit each at Changshu, China, and Ghimbav Brasov in Romania, which allow access to its customers in over 25 countries.

Axis Capital, Equirus Capital, and JM Financial are the managers to the offer.

Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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