Sansera Engineering Ltd IPO

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i) Sansera Engineering is an engineering-led integrated manufacturer of complex and high-quality precision components for the automotive and aerospace sectors, primarily supplying to original equipment manufacturers (“OEMs”) in India and internationally. It manufactures and supplies a wide range of precision forged and machined components that are critical for engine, transmission, and other systems for the two-wheeler, passenger vehicle, and light and heavy commercial vehicle verticals in the automotive sector.

ii) It also supplies its components to the aerospace sector and for off-road vehicles as well as for other segments including tractors, generator sets, stationary engines, and other non-automotive applications. They are a leading supplier to the two-wheeler and passenger vehicle verticals in India. Specifically, it is one of the leading Indian manufacturers of
a. connecting rods, crankshafts, rocker arms, and gear shifter forks for two-wheelers and
b. connecting rods, rocker arms, and gear shifter forks for passenger vehicles.

iii) It is among the top two and top three manufacturers of two-wheeler and passenger vehicle connecting rods in India, respectively; among the top two manufacturers and the largest manufacturer of two-wheeler and passenger vehicle rocker arms in India.

iv) It has longstanding relationships with several well-known Indian and global OEMs. Specifically,
a. In the two-wheeler vertical it has relationships of over 20 years with Bajaj, over 20 years with Yamaha, and over 15 years with HMSI, the fourth, fifth, and second-largest two-wheeler Indian OEMs in terms of domestic production volume for fiscal 2018, respectively.
b. In the passenger vehicle vertical it has relationships of over 30 years with Maruti Suzuki, the leading Indian passenger vehicle OEM in terms of domestic production volume for fiscal 2018, and over eight years with FCA, a leading European passenger vehicle OEM.

v) Sansera engineering is an employee driven, professionally managed organisation and none of its Promoters’ family members are involved in any executive capacity with the Company. The management is led by a professional team comprising of a CEO, head of operations and a CFO. The majority of the management team has been with the Company for more than 10 years and has led the expansion of the products and customer base over the last several years, resulting in business growth and diversification. The management team has ownership stakes in the Company through ESOP schemes with a view to aligning their interests with the performance

Our Strengths
i. Well diversified business model
ii. Leading supplier
iii. Strong capabilities in engineering and design

Objects of the Sansera Engineering Ltd IPO:

Offer for sale up to 17,244,328 Eq Shares of ₹2 aggregating up to ₹1,282.98 Cr
DRHP of Sansera Engineering Ltd IPO
RHP of Sansera Engineering Ltd IPO

Sansera Engineering Ltd IPO Details:

Open Date: Sep 14 2021
Close Date: Sep 16 2021
Total Shares: 17,244,328
Face Value: ₹ 2 Per Equity Share
Issue Type: Book Building
Issue Size: 1282.53 Cr.
Lot Size: 20 Shares
Issue Price: ₹ 734 - 744 Per Equity Share
Listing At: NSE,BSE
Listing Date: Sep 24 2021

Promoters And Management:

i. S Sekhar Vasan, is the Chairman and Managing Director of the Company. He has been a Director of the Company since incorporation. He holds a bachelor of technology degree from the Indian Institute of Technology, Madras, and postgraduate diploma in management from the Indian Institute of Management, Bangalore. He has over 38 years of experience in the field of manufacturing precision products. ii. Unni Rajagopal K, is a Non-Executive Director of the Company. He has been a Director of the Company since March 1, 1991. He holds a bachelor of arts degree from Bangalore University. He is a member of the Institute of Chartered Accountants of India since 1986. He was a partner at Singhvi, Dev & Unni, a chartered accountants’ partnership firm from 1981 to 2018. iii. Raunak Gupta, is a Non-Executive, Nominee Director of the Company. He has been a Director of the Company since July 8, 2013. He holds a bachelor of technology degree from the Indian Institute of Technology, Delhi, and a post-graduate diploma in computer-aided management from the Indian Institute of Management, Calcutta. He is currently employed with TRG Advisors India Private Limited as a Director. He was previously employed with Infosys Technologies Limited, Rabo India Finance Private Limited, Motilal Oswal Investment Advisors Private Limited, and Citi Venture Capital International. iv. Muthuswami Lakshminarayan, is a Non-Executive, Independent Director of the Company. He has been a Director of the Company with effect from July 27, 2018. He holds a master’s degree in technology from the Indian Institute of Technology, Bombay. He spent over 22 years at Bosch. He retired after serving on the board of Bosch Limited as a Managing Director for nine years. He spent over seven years at Harman International (India) Private Limited in the capacities of Managing Director, Country Manager, India, and Advisory Chairman.

Financials of Sansera Engineering Ltd IPO:

Particulars (in Millions) Mar-21 Mar-20 Mar-19 Mar 18 Mar 17 Mar 16
Revenue from operations 15,492 14,571 16,244 11,717 10,392 9,074
Cost of material 6,678. 6,281 7,220 4,785 4,125 3,482
Excise duty 0 0 0 243 725 638
Changes in inventory -43 -18 -167 -201 -128 -32
Conversion charges 526 486 468 427 403 335
Consumption of stores and spares 1335 1310 1506 1,037 953 878
Power and fuel 670 750 841 614.86 477.65 410.32
Employee benefit expenses 2137 2134 2174 1,933 1,740 1,563
Other expenses 1466 1379 1309 520 451 337
Operating Profit 2723 2249 3057 2,355 1,642 1,459
OPM% 17.3% 15.26% 18.6% 20.11% 15.81% 16.08%
Other income 230 159 163 126 63 55
Finance costs 473 580 512 396 298 289
Depreciation and amortisation 1016 939 757 538 444 349
Profit before tax 1461 886 1649 1,547 963 876
Total tax expenses 362 87 668 550 319 243
Profit for the year 1098 799 980 997 644 633
 

Comparison With Peers:

Companies Total Revenue (millions) Face Value (Rs) PE Ratio EPS (Rs) RoNW (%)
Mahindra CIE Automotive Limited 61,050 10 63.9 2.80 2
Sundaram Fasteners Limited 37,513.00 1 48 15.46 16
Motherson Sumi Systems Limited 635,368.00 1 64.7 3.71 9
Endurance Technologies Limited 69,653.00 1 32.8 40.2 19
Sansera Engineering Ltd 14,731.39 2 34.9 21.3 10.47

Recommendation on Sansera Engineering Ltd IPO:

Review and Recommendation of Sansera Engineering IPO by InvestorZone is 5/10 1. Automobile as a sector is not performing well in the last 3 years and same is reflected in the timid growth in the top-line of the company. 2. A leading supplier of complex and high-quality precision engineered components that is gaining market share across automotive and non-automotive sectors. 3. The business model of Sansera Engineering is well diversified by customer base, end segment, geographical spread of revenues and product portfolio.  Moreover, they have a Long-standing relationships with well-known Indian and global OEM customers. 4.  Most important thing is that the issue is priced well. It is coming at P/E of 32x which looks decently priced as compared to its peers.

Lead Manager of Sansera Engineering Ltd IPO:

  1. BNP Paribas
  2. Credit Suisse Securities (India) Private Limited
  3. ICICI Securities Limited
  4. IIFL Holdings Limited
  5. Nomura Financial Advisory And Securities (India) Private Limited

Registrar of Sansera Engineering Ltd IPO:

  1. Link Intime India Private Limited

Company Address:

Sansera Engineering Limited Plant 7, Plot No. 143/A Jigani Link Road, Bommasandra Industrial Area Anekal Taluk, Bengaluru 560 105 Phone: +91 80 2783 9081 Email: rajesh.modi@sansera.in Website: https://sansera.in/

Discussion on Sansera Engineering Ltd IPO:

3 Comments

    As on FY21….

    Total outstanding shares = 4.69 Crores

    PAT of FY21 = 109 Crores

    EPS = 23x

    P/E = 32x

    The pricing looks decent as compared to its peers.

    Reply

    Understanding the business model

    Sansera Engineering provides automotive components to different industries such as 2W, 3W, Passenger Vehicle and Commercial vehicle. So, to understand the business model of Sansera and to know its growth in future we need to study the health and growth of 2W, 3W, Passenger vehicle and Commercial vehicle in India.

    Sansera revenue contribution from different sectors. = Total revenue in 2021 is 1288 Crores.

    2W = 57%
    3W = 0.85%
    Passenger Vehicles = 27%
    Commercial Vehicles = 14%

    So, they are highly dependent on 2W segment for their revenues.

    In 2W we have Hero, and Bajaj are two listed players.

    Bajaj Auto in the last 3 years has shown Revenue growth of just 2% and PAT growth of 4%

    Hero Motocorp in the last 3 years has shown Revenue growth of just 7% and PAT has grown negatively to -7.47%.

    Reply

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