IPO Review – Harsha Engineers International Ltd

The latest IPO (Initial Public Offering) to open up for investor participation through stock markets is that of Harsha Engineers International. This Ahmedabad-based precision bearing cages manufacturer has come up with an IPO, the subscription window for which is September 14 to September 16. The company plans to raise up to Rs. 755 crores via a fresh equity issue of Rs. 455 crores and an offer for sale (OFS) of Rs. 300 crore equity shares. The company currently enjoys a market leadership position in terms of revenue.

As per market observers, Harsha Engineers shares’ premium rose to Rs. 220 in the grey market on the 1st day of allotment from the previous day’s Rs. 200. Let’s have a detailed look at this IPO and review some of the pros and cons of investing in it.

IPO details – Harsha Engineers International Limited

Here are the top details of the IPO that investors should know about:

Issue open date	14 Sep 2022
Issue close date	16 Sep 2022
IPO Allotment date	21 Sep 2022
Refund and unblocking of funds	22 Sep 2022
Shares credited in Demat account	23 Sep 2022
Listing	26 Sep 2022

• IPO dates: September 14 – September 16 2022
• IPO price band: Rs. 314 – Rs. 330
• Bid lot: 45 shares and multiples of similar quantity
• Issue size: Rs. 755 crores
• Offer for sale – Rs. 300 crores
• Reservation:
  • QIB – 50%,
  • Retail – 35%,
  • NII – 15%
• Minimum investment amount: Rs. 14,130

About Harsha Engineers International Ltd

Harsha Engineers International Limited is one of India’s largest manufacturers of precision bearing cages. Incorporated in 2010 as part of the Harsha Group, the company today commands a 50-60% of market share in the organized Indian bearing cages market. As of FY2021, the company also commanded a 6.5% global market share in the organized bearing cages market, specifically in the steel, brass, and polyamide cages segments.

Here are some of the top facts that investors should know about this company:

• The company’s products mainly cater to sectors like automotive, aviation, railways, construction, agriculture, renewables, mining, and electrical among others.
• It has a business presence in more than 25 countries.
• For the year ending March 2022, the company recorded a profit of Rs. 91.94 crores from revenues of Rs. 1,321.48 crores. This is a significant hike compared to the previous year’s profits of Rs. 45.44 crores from revenues of Rs. 876.73 crores.

Company strengths

Some of the company’s strengths that investors must know about:

• The company is a global player offering a diversified range of precision engineering products to end-user sectors.
• Both its local and international production and storage facilities are strategically located.
• The company enjoys strong prowess in areas of designing, tooling, automation and development.
• Long-standing client relationships is also one of its strong points.
• It has showcased a consistent growth trajectory and positive financials. The company has seen a positive improvement in its margins. In FY19 it incurred losses of Rs 27.4 crores against which it made profits of Rs. 91.9 crores in FY22. Its profits have been rising year on year with a climb of 2.4% in FY20, 5.1% in FY21 and 6.87% in FY22.
• It is managed by a capable and highly experienced senior management team.

Company weaknesses

Some of the drawbacks that investors should note before investing in this IPO:

• In case the company happens to lose any of its major customers, it can have a significant impact on the company’s bottom line.
• Although the company enjoys market dominance and strong customer relationship currently, there are chances that it may lose clientele in the future with any new entrant in the market.
• Since the company has a presence across the globe, its earnings are subject to exchange rate fluctuations.
• The return on average equity of Harsha Engineers is 19% vis-à-vis its competitors who enjoy ROEs of 22% to 29%.

Risks involved in Harsha Engineers IPO

Here are some of the top risks surrounding this company:

1. The company may be unable to further diversify its offerings in the future and this could result in depleting revenues.
2. The company recently underwent a corporate reorganisation. This could potentially lead to operational and administrative inefficiencies in the near future.
3. The proceeds from the offer for sale (OFS) will solely benefit the company’s existing shareholders and these cannot be used for the company’s growth.

Should you invest in Harsha Engineers IPO?

On day 1 of Harsha Engineers IPO, the overall issue was subscribed 2.87 times and the retail portion was subscribed 3.22 times. This reflects that investors are positive about the company and aiming for positive returns as the company enjoys a stronghold in its business segment. Before investing, however, investors must consider the above-mentioned pros and cons to gauge the overall prospects of the investment.

How do you invest in Harsha Engineers IPO?

You could head over to Fisdom App to invest in this IPO.

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