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Tega Industries IPO review (Apply)

Review By Dilip Davda on Nov 27, 2021

•    TIL is one of the leading players in mining and mineral beneficiations.
•    It has posted consistent growth in top and bottom lines for the last 3 fiscals. 
•    Q1 of FY22 indicates an unmatched ratio based on FY21 full years working. 
•    Management is confident of maintaining trends of the last three fiscals going forward.
•    Based on all parameters, the issue appears fully priced. Investors may consider it with a medium to long term perspective. 

ABOUT COMPANY:
Tega Industries Ltd. (TIL) is a leading manufacturer and distributor of specialized 'critical to operating' and recurring consumable products for the global mineral beneficiation, mining and bulk solids handling industry, on the basis of sales as of June 30, 2021 (Source: F&S Report). Globally, it is the second-largest producer of polymer-based mill liners, on the basis of revenues as of June 30, 2021 (Source: F&S Report).

The company offers comprehensive solutions to marquee global clients in the mineral beneficiation, mining and bulk solids handling industry, through a wide product portfolio of specialized abrasion and wear-resistant rubber, polyurethane, steel and ceramic based lining components, used by customers across different stages of mining and mineral processing, screening, grinding and material handling, including after-market spends on wear, spare parts, grinding media and power, which are regular operating expenses for its customers. 

TIL's engineering capability, which has evolved over decades, has enabled it to consistently offer quality, complex manufactured products within stipulated timelines, allowing it to reduce downtime and maximize operational efficiency for customers, and forge robust relationships with them leading to high recurring revenues. 

It commenced operations in 1978 in India, with a foreign collaboration with Skega AB, Sweden. Foreign partners entire stake was bought out by the Indian promoters in 2001. Its product portfolio comprises more than 55 mineral processing and material handling products. 

TIL's products offering includes consumables required in the mines and mineral processing industry. In the sequence of their usage in the mineral processing value chain, after blasting to floatation, its products include chutes and its liners, grinding mill liners, trommels and screens, hydrocyclones, pumps and flotation parts and conveyor products. Its product range is engineered with a combination of mineral processing engineering, mechanical engineering and material sciences while utilising TIL's expertise in tribology.

TIL has around 25% domestic sales and the rest is coming from exports. Historically its first half generates around 40% of annual turnover and the second half 60%. The management is confident of maintaining the trends expressed for the last three fiscals going forward.  The turnover consists of 25% new orders and the rest from repeat orders, thus it enjoys good markets among its customers for consumable products of TIL. 

ISSUE DETAILS/CAPITAL HISTORY: 
To provide an exit to some of its stakeholders and for listing benefits, TIL is coming out with a maiden IPO of equity shares of Rs. 10 each via book building process with its secondary offer. The company is issuing 13669478 equity shares of Rs. 10 each in a price band of Rs. 443 - Rs. 453 per share to mobilize Rs. 619.23 cr.  at the upper cap. The minimum application to be made is for 33 shares and in multiples thereon, thereafter. The issue opens for subscription on December 01, 2021, and will close on December 03, 2021. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 20.62% of the post issue paid-up capital of the company. The company has allocated 50% for QIBs, 15% for HNIs and 35% for the Retail investors. 

The two joint Book Running Lead Managers (BRLMs) to this offer are Axis Capital Ltd. and JM Financial Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Having issued initial equity at par, the company raised further equity in the price range of Rs. 20.50 to Rs. 65.00 per share between September 1990 and November 2021. It has also issued bonus shares in the ratio of 12 for 1 in October 2013. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.02, Rs. 0.34, Rs. 0.53, Rs. 1.26 and Rs.  170.25 per share. 

This IPO being pure OFS, TIL's current paid-up equity capital of Rs. 66.29 cr. will remain the same post issue. (66293149 shares). Based on the upper cap of the issue price, the company is looking for a market cap of Rs. 3003.08 cr.

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, TIL has (on a consolidated basis) posted total turnover/net profits of Rs. 643.01 cr. / Rs. 32.67 cr. (FY19), Rs. 695.54 cr. / Rs. 65.50 cr. (FY20) and Rs. 856.68 cr. / Rs. 136.41 cr. (FY21).  For the first quarter of FY22 ended on June 30, 2021, it has earned a net profit of Rs. 11.88 cr. on a turnover of Rs. 179.39 cr. 

For the last three fiscals, TIL has posted an average EPS of Rs. 14.34 (fully diluted) and an average RoNW of 17.19%. The issue is priced at a P.BV of 4.19 based on its NAV of Rs. 108.06 as of June 30, 2021. As of June 30, 2021, its paid-up equity capital of Rs. 66.29 cr. is supported by free reserves of Rs.  564.86 cr. 

Based on FY21 earnings, while the asking price is at a P/E of 22.01, on annualised FY22 earnings, the asking price is at a P/E of 63.18. On the basis of the last three fiscals average EPS, the asking price stands at a P/E of 31.59. Based on all other parameters, the issue appears fully priced. 

DIVIDEND POLICY:
The company has not paid any dividends on the equity shares from FY19 till the filing of this offer documents. It has paid a dividend of Rs. 500 per year on CCPP for the last three fiscals in accordance with the SHA. The company will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per offer documents, the company has shown AIA Engg. as its listed peer. It is currently trading at a P/E of 40.65 (as of November 26, 2021). However, they are not truly comparable on an apple to apple basis. 

MERCHANT BANKERS' PERFORMANCE:
The two BRLMs associated with this issue have handled 45 public issues in the past three years, out of which 18 issues closed below the offer price on the listing date.


Conclusion / Investment Strategy

While the company has posted growth for the last three fiscals, Q1 for FY22 does not match in ratio to FY21 performance. However, according to management it’s a traditional aspect and are confident of maintaining the tempo of growth going forward. On average financial parameters and Q1-FY22 numbers issue appears fully priced. Considering the growth prospects, niche places enjoyed by the company in global markets, investors may consider investing in this offer from a medium to long term perspective.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Nov 27, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Tega Industries IPO FAQs

  1. 1. Why Tega Industries IPO?

    The initial public offer (IPO) of Tega Industries Limited offers an early investment opportunity in Tega Industries Limited. A stock market investor can buy Tega Industries IPO shares by applying in IPO before Tega Industries Limited shares get listed at the stock exchanges. An investor could invest in Tega Industries IPO for short term listing gain or a long term.

  2. 3. Tega Industries IPO what should investors do?

    Tega Industries IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Tega Industries IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  3. 4. Is Tega Industries IPO good?

    Our recommendation for Tega Industries IPO is to subscribe.

  4. 5. Is Tega Industries IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Tega Industries IPO.

  5. 6. When will Tega Industries IPO allotment status?

    The Tega Industries IPO allotment status will be available on or around Dec 8, 2021. The allotted shares will be credited in demat account by Dec 10, 2021. Visit Tega Industries IPO allotment status to check.

  6. 7. When will Tega Industries IPO list?

    The Tega Industries IPO will list on Monday, December 13, 2021, at BSE, NSE.

1 Comments

1. Hanuman  Dec 14, 2021 11:32:16 PM I Like It. | Report Abuse Reply
Account Dormate hone se tega ko sell nahi kar paya.....
Kya ab recover hone ke chance hai....
Ya nikal deve....ple guide kare