Tega Industries IPO opens today; Check issue price, GMP, analyst recommendation, other details here

Tega Industries will not receive any funds from the IPO as the issue is entirely an offer for sale.

Tega Industries Rs 620 crore IPO opened for subscription today. The company is looking to raise funds in a fixed price band of Rs 443-453 per share through the public issue which is entirely an Offer for Sale (OFS) by existing shareholders of the firm. Tega Industries is a manufacturer and distributor of specialized ‘critical to operate’ and recurring consumable products for the global mineral beneficiation, mining and bulk solids handling industry. The IPO of Tega Industries will close for subscription on Friday, December 3.

Issue details

Ahead of the IPO, the company has managed to raise Rs 185.7 crore from 25 anchor investors. These include marquee names such as SBI Mutual Fund, Goldman Sachs, ICICI Prudential, HDFC Trustee Company, Axis Mutual Fund, BNP Paribas, among others. Anchor investors have been allocated 41 lakh shares at the upper end of the price band of Rs 453 per share. In the grey market, shares of Tega Industries were trading with a premium of Rs 400 per share, people dealing in unlisted shares said. The stock has extended gains in the grey market from earlier this week.

Valuations reasonable

Tega Industries will not receive any funds from the IPO as the issue is entirely an offer for sale. “At the upper end of the price band, it is valued at ~22x P/E for FY21, respectively,” said analysts at ICICI Direct. The brokerage firm added that Tega’s strong market position, innovative products and higher entry barriers is likely to help maintain its margins while consistent growth with high repeat business (~74%) would augur well in the long run. ICICI Direct has a ‘Subscribe’ rating on the issue. Holding similar views, Marwadi Financial Services said that the issue is available at reasonable valuations while pinning a ‘subscribe’ tag on it.

Tega Industries is the second-largest producer of polymer-based mill liners globally. To add to that, their product portfolio comprises more than 55 mineral processing and material handling products. “We believe that the company is well placed across the value chain of a mineral processing as it provides a wide range of products and solutions which are critical at different stages of mineral processing,” said Religare Broking. The brokerage firm added that it has a positive view of the company from a long-term perspective.

International market dependency a negative?

Almost 85% of Tega Industries revenue comes from outside India. The company intends to gain market share and increase penetration globally in North America, South America, Australia and South Africa. “Besides, it has plans to expand its manufacturing unit in Chile, grow product offerings and explore opportunities for inorganic growth,” Religare Broking said. The massive dependency on international markets seen as a risk by ICICI Direct. “As 85% of Tega’s revenue comes from outside India, that expose them to the risks of doing business in foreign countries, which may adversely affect their business, financial condition and results of operations,” they said.

50% of the entire issue is reserved for qualified institutional buyers while 35% is for retail investors and 15% for non-institutional buyers. Post issue the promoter group’s shareholding will drop to 79.17% from the current 85.17%. On the other hand, Public shareholding will increase to 20.83% from 14.83%.