Sansera Engineering IPO Opens Today: Sansera Engineering will open its Rs 1,283-crore initial public offering (IPO) from September 14-16. Bengaluru-based auto component manufacturer has fixed the price band of the IPO at Rs 734-744 per share of the face value of Rs 2 each. Sansera Engineering IPO is a complete offer for sale of 17.2 million shares by the selling shareholders. The objects of the Sansera Engineering IPO are to carry out the offer for sale and achieve the benefits of listing the equity shares on the stock exchanges. At upper price band of Rs 744, the offer could raise up to Rs 1,283 crore. As this issue is completely an Offer for Sale, the auto manufacturing company will not directly receive any proceeds from the IPO. All proceeds will go to the selling shareholders. “The company expects that listing of the equity shares will enhance the visibility and brand image and provide liquidity to the shareholders and will also provide a public market for the equity shares in India,” said Kotak Securities in a note.
Sansera Engineering IPO: Company Strength
Sansera Engineering Limited is one of the leading suppliers of complex and high-quality precision engineered components. The company has a well-diversified business model with a strong customer base, geographical spread of revenues from India and foreign countries such as Europe and the USA and diversified revenue stream from segments such as two-wheelers, passenger vehicles and commercial vehicle.
Further, its long-standing relationships with well-known Indian and global original equipment manufacturer customers augur well for growth. In the two-wheeler segment, the company has relationship of 25 years with Bajaj, over 20 years with Yamaha and over 20 years with HMSI. In the passenger vehicle vertical, it has relationships, Sansera Engineering has maintained a strong working relationship with Maruti Suzuki for the last 30 years with Stellantis N.V. (formerly Fiat Chrysler Automobiles) for the 10 years, according to reports.
“Going forward, the company has a plan to further diversify into non-automotive businesses, innovate new products and develop technology to cater to growing opportunities in the electrification of vehicles,” said Religare Broking in a note.
Sansera Engineering IPO: Key Risks
Investors’ sentiments remain weak towards automotive companies amid fear of rising competitions from electric vehicles players and requirement for capex requirement for the expansion, said analyst. “Any failure to adapt to industry trends and evolving technologies to meet customers’ demands may materially adversely affect the company’s business and results of operations,” said Kotak Securities in a note.
“Primary raw materials for Sansera Engineering Limited are alloys steel rounds bars, non-ferrous alloys aluminium and titanium. Thereby volatility in metal prices include steel poses risk to business as raw material cost was 50 per cent of total operating expenditure in FY21 (43 per cent of sales),” said Choice Broking in a report.
Sansera Engineering IPO Pricing
The auto component manufacturer has set the price band at Rs 734 to Rs 744 apiece. “On the upper price band of Rs 744 and last 3 years average EPS of Rs 18.42, the P/E ratio works out 40x. The company has set IPO price in the P/E range of 36x to 40x. The listed peers of Sansera Engineering are — Minda Industries trading at P/E 90x (Highest) and Endurance Technologies trading at P/E 33x (Lowest) and industry average P/E of 60x. Hence, Sansera Engineering IPO has been reasonably priced.
Sansera Engineering IPO GMP
Sansera Engineering IPO is commanding a premium of Rs 60 in the unlisted market. The share of Sansera Engineering was trading at Rs 804, more than 8 per cent up over the upper price band of the issue. The grey market premium is the price at which IPO shares are traded in the unlisted market. GMP is often considered as a good indicator of whether an IPO will perform well in the domestic market or not.
Should you subscribe to Sansera Engineering IPO?
Sansera Engineering is one of the top 10 global suppliers of connecting rods within the light vehicle segment and commercial vehicle segment. It is one of the leading manufacturers of connecting rods, crankshafts, rocker arms and gear shifter forks for two-wheelers and connecting rods and rocker arms for passenger vehicles in the country.
Most of the analysts recommended Subscribe Rating to Sansera Engineering IPO considering healthy financials, powerful clients and business relationship over the years and positive future of auto component industry
“At the higher price band of Rs 744, the issue is valued at P/E of 34.8x on FY21 EPS basis which is in line with peer average trailing P/E of 34x. As per our view, likely strong revenue growth and healthy EBIDTA margin over 15 per cent to boost profitability in coming future,” said Choice Broking in a report.
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