Harsha Engineers International Ltd IPO

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i. Harsha Engineers are the largest manufacturer of precision bearing cages, in terms of revenue, in organised sector in India, and amongst the leading manufacturers of precision bearing cages in the world. They offer diversified suite of precision engineering products across geographies and end-user industries.

ii. Company’s business comprises:
(i) engineering business, under which we manufacture bearing cages (in brass, steel and polyamide materials), complex and specialised precision stamped components, welded assemblies and brass castings and cages & bronze bushings; and
(ii) solar EPC business, under which they provide complete comprehensive turnkey solutions to all solar photovoltaic requirements.

iii. Harsha Engineers has approximately 50-60% of the market share in the organised segment of the Indian bearing cages market and 6.5% of the market share in the global organised bearing cages market for brass, steel and polyamide cages in CY 2021 . They offer a wide range of bearing cages starting from 20 mm to 2,000 mm in diameter and the bearing cages find its application in the automotive, railways, aviation & aerospace, construction, mining, agriculture, electrical and electronics, renewables sectors etc.

iv. Harsha Engineers is a technology driven company with a strong focus on quality, design and tool development, which has allowed it to develop products suited to its customers’ requirements. They have the expertise to design and develop advance tooling in-house which enables them to manufacture precision bearing cages and complex and specialised precision stamped components. Bearing cages are critical parts of a bearings and it requires high precision technology to manufacture them. The Company, which housed a team of 253 qualified engineers (including solar EPC business) as of March 31, 2022, along with the decades of experience in bearing cages engineering, enable them to develop specialized products and solutions.

v. As of March 31, 2022, the company has been able to manufacture more than 7,205 bearing cages and more than 295 other products for customers in the automotive, railways, aviation & aerospace, construction, mining, agriculture, electrical and electronics, renewables sectors, allowing it to meet changing customer requirements. In addition, over the past three years the product development and innovation centre has developed more than 1,200 products in different bearing types.

vi. Competitive Strengths:

i. Long-standing relationships with leading clientele.
ii. Strategically located domestic and international production facilities and warehouses.
iii. Consistent track record of growth and financial performance.
iv. Expertise in Tooling, design development and automation.
v. Strong, experienced and dedicated senior management team and qualified workforce.

Objects of the Harsha Engineers International Ltd IPO:

It is a mix of OFS(300 Cr) and Fresh Issue (455 Cr) The company proposes to utilise the Net Proceeds of the Fresh Issue towards funding of the following objects: (a) Pre-payment or scheduled repayment of a portion of the existing borrowing availed by the Company. (b) Funding capital expenditure requirements towards purchase of machinery. (c) Infrastructure repairs and renovation of the existing production facilities including office premises in India. (d) General corporate purposes.
DRHP of Harsha Engineers International Ltd IPO
RHP of Harsha Engineers International Ltd IPO

Harsha Engineers International Ltd IPO Details:

Open Date: Sep 14 2022
Close Date: Sep 16 2022
Total Shares: 22878787
Face Value: ₹ 10 Per Equity Share
Issue Size: 755 Cr.
Lot Size: 45 Shares
Issue Price: ₹ 314-330 Per Equity Share
Listing At: NSE,BSE
Listing Date: Sep 26 2022

Promoters And Management:

i. Rajendra Shah is the Chairman and Whole-time Director of the Company. He holds a bachelor’s degree in Mechanical Engineering from Lukhdhirji Engineering College, Morbi. He was awarded the AMA Atlas Dycechem “Outstanding Entrepreneur of the Year Award 2001” by the Ahmedabad Management Association. Currently, he is looking after overall management of the Company, particularly all financial matters. He is associated with Blind People’s Association, Ahmedabad as President. He was Chairman of CII Gujarat for 2019-20. He has over 35 years of experience in the precision engineering business for bearing cages and stamped components. ii. Harish Rangwala is the Managing Director of the Company. He holds a bachelor’s degree in Mechanical Engineering from Lukhdhirji Engineering College, Morbi. He served at Tata Chemicals and thereafter joined the Company. Currently, he is looking after overall management of the Company along with Renewable energy division. He has over 35 years of experience in the precision engineering business for bearing cages and stamped components. iii. Vishal Rangwala is the Chief Executive Officer and Whole-time Director of the Company. He holds a bachelor’s degree in Mechanical Engineering from University of Pune. He further holds a Master of Science degree in Engineering Management from University of Southern California. In 2005, he was appointed as a senior staff analyst at United Service - a division of United Airlines. Thereafter he joined the Company in September 2007, as a manager for marketing. He is responsible for the overall strategic directions for the Harsha group and is currently leading marketing and corporate functions. He has over 13 years of experience in the precision engineering business for bearing cages and stamped components.

Financials of Harsha Engineers International Ltd IPO:

Revenue from operations March 22 March 21 March 20
Revenue from operations 1,321 873 885
Cost of Materials Consumed 799 434 448
Change in Inventories -59 -19 -10
Employee Benifit Expense 158 146 149
Other Expense 254 190 192
Operating Profit 169 122 106
OPM% 12.79% 13.97% 11.98%
Finance Cost 24 29 32
Depreciation 35 34 35
Other Income 17 2 13
Profit (Loss) before tax 126 60 31
Tax expense 34 15 6
Profit (Loss) for the period 91 45 21
Shares Outstanding 9.1 9.1 9.1
EPS 10 4.9 2.3
Profitability Parameters 1. ROE
2022 2021 2020
NPM 6.8% 5.1% 2.3%
Asset Turnover 1.16 0.89 0.92
Financial Leverage 2.22 2.30 2.62
ROE 17.47% 10.54% 5.66%
2. ROCE
2022 2021 2020
EBIT Margins 0.16 0.18 0.15
Capital Employed Turnover 1.96 1.59 1.80
ROCE 30.85% 28.91% 27.00%
3. ROIC
2022 2021 2020
EBIT*(1-t) 151.92 119.25 94.5
Equity+Debt-Cash 877 741 758
ROIC 17.32% 16.09% 12.47%

Comparison With Peers:

Name of the Company CMP FV EPS P/E
Harsha Engineers International Limited 330 10 10 33
Timken India Limited 3,383 10 51.64 65.5
SKF India Limited 4,978 10 90.05 55.3
Rolex Rings Limited 1,966 10 55.55 35.4

Recommendation on Harsha Engineers International Ltd IPO:

Review and Recommendation of Harsha Engineers by IZ team is 7/10

1. Harsha Engineering the largest manufacturer of precision bearing cages, in terms of revenue, in organised sector in India, and amongst the leading manufacturers of precision bearing cages in the world. 2. It is a technology driven company with a strong focus on research and development, which has allowed them to develop products suited to the customers’ requirements. 3. They have approximately 50-60% of the market share in the organised segment of the Indian bearing cages market and 6.5% of the market share in the global organised bearing cages market for brass, steel and polyamide cages in Fy21. They supply products to customers in over 25 countries covering five continents i.e., North America, Europe, Asia, South America and Africa. 4. Company’s bearing cages find its application in the automotive, railways, aviation & aerospace, construction, mining, agriculture, electrical and electronics, renewables sectors etc. 5. The founder Promoters, Harish Rangwala and Rajendra Shah, have more than 35 years of experience in the precision engineering and bearing cages manufacturing sector and have played a pivotal role in the innovation, success and growth. Additionally, the second generation Promoters, Vishal Rangwala and Pilak Shah, are also involved in the overall operations, strategies and business of the Company. 6. Company has shown decent growth in the last 3 years wherein the revenue has gone up from 885 Crores to 1321 Crores. 7. PAT has gone up from 21 Crores in Fy20 to 91 Crores in Fy22. 8. EPS(Post IPO) = 10 , asking P/E is 33x which is reasonable as compared to peers. 9.ROE, ROCE and ROIC all the profitability parameters looks excellent. 

Lead Manager of Harsha Engineers International Ltd IPO:

  1. Axis Capital Limited
  2. Equirus Capital Private Limited
  3. JM Financial Consultants Private Limited

Registrar of Harsha Engineers International Ltd IPO:

  1. Link Intime India Private Limited

Company Address:

Harsha Engineers International Ltd NH-8A, Sarkhej- Bavla Highway, Changodar, Ahmedabad 382213 Phone: +91 2717-618200 Email: sec@harshaengineers.com Website: http://www.harshaengineers.com/

Discussion on Harsha Engineers International Ltd IPO:

3 Comments

    Looks Like Good IPO with reasonable pricing. GOT TO B LUCKY TO GET ALLOTMENT. LONG TERM GOOD EARNING FOR ALLOTEES

    Reply

    Bearing cage is an important component within a bearing and requires the highest lead time for development and technical and tooling expertise for its manufacture when compared to other components of a bearing.

    Given the critical function of a bearing cage, and the resultant quality requirements, global bearing companies have steadily increased outsourcing for manufacturing of bearing cages and the business from these bearing companies has gotten concentrated to a few bearing cage manufacturers including Harsha Engineering.

    Reply

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