The IPO of Sansera Engineering may be listed in the stock market on Friday 24 September. However, given the current woes of the auto industry and lower-than-expected subscriptions, analysts believe that the stock will not list at a higher premium. The Rs 1,283 crore IPO of Sansera Engineering was open for subscription between 14 and 16 September. The company’s IPO has been subscribed 11.47 times. Post listing in the market, it will join the league of Endurance Technologies, Minda Industries, Sundaram Fasteners, Suprajit Engineering, Bharat Forge, Motherson Sumi Systems and Mahindra CIE Automotive.
Before IPO, Rs 382 crore was raised from anchor investors
Qualified Institution Buyers have bid 26.47 times of the shares reserved for their share in this IPO. On the other hand, non-institution investors subscribed 11.37 times of the shares reserved for their share. A day before the IPO opening, Sansera Engineering issued 15.18 lakh equity shares at Rs 744 to 27 anchor investors and raised Rs 382.05 crore.
The company has already tried to get listed in the domestic equity market. About three years ago in August 2018, the company had submitted papers to SEBI to bring the IPO and SEBI’s approval was also received. Sansera Engineering has a business relationship of more than 30 years with Maruti Suzuki.
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What is the opinion of experts on Sansera Engineering?
Rating: Positive View
The revenue of the auto component industry is expected to grow at a CAGR of 11.9 per cent (Compound Annual Growth Rate) to Rs 5.28 lakh crore during the financial year 2021-26. Exports are also expected to grow at a CAGR of 9.4 per cent during this period. Due to this, companies making auto components will get benefit. However, the biggest risks facing these companies are over-dependence on a few key customers and rising raw material costs.
Rating: Not Rated
Suncera’s business model is well-diversified with a well-diversified customer base, end segment, geographic revenue and product portfolio.
In FY 2021, the company supplied 71 customers, which was 64 in FY 2019. The number of its customers is continuously increasing.
Sunsera sells products in the automotive sector and non-automotive sector.
Based on the FY21 EPS at the upper price of the price band of Rs 744, the valuation of the IPO is at a P/E of 34.8x which is close to 34x the industry average. With better revenue growth prospects and a healthy EBITDA margin of over 15 per cent, its profits are likely to grow. Investor’s inclination to invest in auto companies may remain weak as they may face stiff competition from EV companies and EV expansion will require more capital.
According to the calendar year 2020, Sansera Engineering is among the 10 largest companies in the world supplying connecting rods in the segment of light and commercial vehicles. The company has strong relationships with several major Indian and global OEMs (Original Equipment Manufacturers).
The company sells products in many segments and its product portfolio is very diversified. It has customers all over the world.
In terms of valuation, its IPO has been valued at a P/E of 36.2x as per FY21 earnings. The IPO is priced better than the listed industry peers in terms of the upper price of the price band. Strong product portfolio, advanced manufacturing capabilities and good track record can make it a subscriber for long term.
(Input: Surabi Jain)
(The stock recommendations given in the story are those of the respective research analysts and brokerage firms. Financial Express Online takes no responsibility for the same. Investments in capital markets are subject to risks. Please consult your advisor before investing.)