Harsha Engineers International will be the 20th initial public offering in the current year, opening for subscription on September 14. Since August, four issues have been launched.
Here are 10 things to know about the public issue:
1) IPO Dates
The company will open its maiden public issue for subscription on September 14, and the offer will close on September 16. Anchor book of the offer opened on September 13, a day before issue opening.
2) Public Issue Size
Harsha Engineers plans to garner Rs 755 crore through its public issue. The offer comprises a fresh issue of Rs 455 crore, which is 60 percent of the total offer size, and the rest of Rs 300 crore will be an offer for sale by promoters.
Rajendra Shah and his wife Nirmala Shah will offload shares worth Rs 66.75 crore each through offer for sale, while Rs 75 crore worth shares each will be sold by Harish Rangwala and his wife Charusheela Rangwala. Pilak Shah, the son of Rajendra Shah, will be selling shares worth Rs 16.5 crore.
The company has reserved shares worth Rs 2.5 crore of the offer for its employees, who will get those shares at a discount of Rs 31 per share to the final offer price.
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3) Price Band
The price band for public issue has been fixed at Rs 314 to Rs 330 per share.
4) Reservation of shares for investors and Lot Size
Half of the offer size is reserved for qualified institutional buyers (including anchor book), 15 percent for non-institutional investors, and the remaining 35 percent for retail investors.
Investors can bid for a minimum of 45 equity shares and in multiples of 45 shares thereafter. With this, retail investors can make a minimum investment of Rs 14,850 per lot, and the maximum would be Rs 1,93,050 for 13 lots as they are allowed to invest up to Rs 2 lakh in public issue.
5) Objectives of IPO
The company will repay some debts through fresh issue money. Also the funds will be utilised towards purchase of machinery, and infrastructure repairs & renovation of existing production facilities including office premises in India, apart from general corporate purposes.
6) Company Profile
Harsha Engineers claimed that it is the largest manufacturer of precision bearing cages, in terms of revenue in India, with approximately 50-60 percent of the market share in the organised segment of Indian bearing cages market and 6.5 percent of the market share in global organised bearing cages market for brass, steel and polyamide cages in CY21.
It operates two businesses - one is engineering segment where it manufactures bearing cages, and the second is solar EPC division, under which it provides complete comprehensive turnkey solutions to all solar photovoltaic requirements - with four manufacturing facilities including units in China and Romania.
It caters to several sectors including automotive, railways, aviation & aerospace, construction, mining, agriculture, electrical and electronics, and renewables sectors, with supplying products to customers in over 25 countries.
7) Promoters
Harsha Group was established in the year, 1986 by founder and promoters Harish Rangwala and Rajendra Shah who has more than 35 years of experience in the precision engineering and bearings cages manufacturing sector. Vishal Rangwala and Pilak Shah from the next generation are also part of promoter group.
The company is largely owned by these promoters and their family members. Hence, after the public issue, their shareholding in the company will be below 75 percent, from 99.7 percent now.
Rajendra Shah is currently the Chairman and Whole-time Director, and Harish Rangwala is the Managing Director of the company, while
Vishal Rangwala is the company's Chief Executive Officer and Wholetime Director, while Pilak Shah is the Chief Operating Officer and Wholetime Director.
Hetal Ukani is also the Whole-time Director on the board, while the independent directors are Ambar Patel, Neharika Vohra, Kunal Shah, Bhushan Punani, and Ramakrishnan Kasinathans.
8) Financials
Harsha Engineers recorded a 51.2 percent growth in revenue from operations at Rs 1,321.48 crore for FY22 compared to previous financial year, and the maximum contribution was from its engineering business with orders won in previous year reflecting in FY22 Also two-third of its engineering business contributed by exports in FY22.
Profit in the same period increased by 102 percent to Rs 91.94 crore primarily due to increase in revenue from engineering business and reduction in operating loss of solar EPC business as well as gain on account of exchange rates.
At the operating level, its EBITDA margin has expanded to 13.9 percent in FY21 but was dropped to 12.8 percent in FY22 on account of higher input cost.
Revenue growth was at a 22 percent CAGR during FY20-FY22 and the profit grew at a 105 percent CAGR during the same period.
9) Share Allotment and Listing Dates
Harsha Engineers will finalise the share allotment by September 21, while the unsuccessful investors will receive funds in their bank accounts by September 22, and the shares will be credited to demat accounts of eligible investors by September 23.
The listing of equity shares on the BSE and NSE will take place on September 26 as per the IPO schedule provided by the company.
Axis Capital, Equirus Capital, and JM Financial are acting as the book running lead managers to the issue, while Link Intime India is the registrar to the offer.
10) Risks and Concerns
Here are key risks and concerns highlighted by brokerage houses:
a) The company is dependent upon a limited number of customer groups for a significant portion of revenue from engineering business. As of March 2022, it supplied products to each of the top six global bearing manufacturers which contributed 75 percent to its engineering business.
b) Also the business contribution from Europe and China was more than 50 percent. Motilal Oswal says though Harsha Engineers has not being impacted so far significantly and the order book remains strong, prolonged uncertainty could impact future revenues.
c) The company also has a risk of foreign currency fluctuation as more than 60 percent of business comes from exports.
d) Contingent liabilities worth Rs 90 crore (around 10 percent of balance sheet) could pose a risk, says Motilal Oswal
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