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    Tega Industries IPO opens: Should you subscribe to the issue?

    Synopsis

    The company has fixed its price band in the range of Rs 443-453 apeice. Investors can bid for a minimum of 33 shares and then in the multiples of thereof. The IPO can be subscribed till Friday, December 3.

    Tega Industries sets IPO price band at Rs 443-453 per share
    Axis Capital and JM Financial are the merchant bankers to the public issue. The shares of the company will be listed on both BSE and NSE.
    New Delhi: The Rs 619 crore IPO of Kolkata-based Tega Industries, manufacturer of consumables for mining industry, kicked off for subscription on Wednesday, December 1.

    The issue is entirely an offer for sale (OFS) of up to 13,669,478 equity shares by promoters and existing shareholders and the company will not receive any proceeds from the IPO.

    Promoters Madan Mohan Mohanka and Manish Mohanka will sell 33,14,657 equity shares and 6,62,931 equity shares, respectively, through the offer-for-sale, and the remaining 96,91,890 equity shares will be offloaded by investor Wagner.

    The company has fixed its price band in the range of Rs 443-453 apeice. Investors can bid for a minimum of 33 shares and then in the multiples of thereof. The issue can be subscribed till Friday, December 3.

    Majority of the brokerages have a positive view on the issue and have recommended subscribing to the IPO, citing attractive pricing and market leadership.

    However, the company competes with strong multinationals for its product and service portfolio. Though the competition is limited, it comes from both organised and unorganised players.

    Marwadi Shares and Finance said considering the FY21 adjusted EPS of Rs 20.58 on a post-issue basis, the company is going to list at a P/E of 22.02 with a market cap of Rs 3,003.1 crore, which is at discount to its peers.

    The brokerage has assigned a 'subscribe' rating to this IPO due to its leadership in specialized and 'critical to operate' products, with high barriers to replacement or substitution and reasonable valuation as compared to its peers.

    The company, which plans to expand its manufacturing services both in India and overseas, has deep relationships with some of the world’s largest senior miners.

    Tega is the second largest producer of polymer-based mill liners in the world on the basis of sales as of June 2021. It has a highly diversified revenue stream from various geographies of the world.

    The IPO is valued at 22x FY21 earnings, which looks attractive compared to its close peer AIA Engineering, said Reliance Securities with a subscribe rating on the issue.

    "Further, the market size of global crushing, screening, and mineral processing equipment offers sustained growth visibility for the company," it added. "The strong balance sheet, industry’s leading return ratio and strong cash generation ability offer an edge over peers."

    The company intends to gain market share and increase penetration globally in North America, South America, Australia and South Africa. It has plans to expand its manufacturing unit in Chile, grow product offerings and explore opportunities for inorganic growth.

    According to Canara Bank Securities, the issue is available at a PE of 18.80x for FY21, which appears to be attractive. The company has shown strong growth potential in the past 3 years. It has recommended subscribing for listing as well as long-term gains to the issue.

    Tega Industries has garnered Rs 186 crore from anchor investors. The company has decided to allocate 41 lakh equity shares to anchor investors at Rs 453 apiece, valuing the transaction size at Rs 185.76 crore, according to a BSE circular.

    BNP Paribas Arbitrage, Goldman Sachs Funds, Ashoka India Equity Investment Trust Plc, Kuber India Fund, SBI Mutual Fund (MF), ICICI Prudential MF, HDFC MF, Axis MF, Tata MF and Aditya Birla Sun Life MF are among the anchor investors.

    In the last 3 years, the company has shown stable growth in revenue and net profit. The margins of the company are also expanding, said Swastika Investmart in its IPO note. The company caters to the requirements of mining companies globally.

    "The company has a sufficient cash balance where the PE fund is exiting. The valuation of the company seems to be attractively priced for investors," it added with a subscribe rating for listing gains and long term.

    The company reported a total revenue of Rs 179.38 crore in the period ended on June 30, 2021 with a net profit of Rs 11.88 crore. Revenue and net profit in the financial year 2021 stood at Rs 856.68 crore and Rs 65.5 crore, respectively.

    As of June 30, 2021, the company has an order book of Rs 316.14 crore, which allows them significant visibility to plan for future growth. The company is net debt free as of June 2021.

    The company is well placed across the value chain of mineral processing as it provides a wide range of products and solutions which are critical at different stages of mineral processing, said Religare Broking.

    "Its leadership position, strong R&D, track record of developing innovative product portfolio and marquee global customers are key positives for the company," it added with a positive view on the company.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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