Bharat Gears RI review - (Apply)

•    BGL is one of the leading players in the automotive gears segment.
•    Over the period, it has widened its product portfolio to meet customers demand.
•    It suffered setbacks for FY20 and FY21 in line with general market trends.
•    It is back on track as indicated by H1-FY22 unaudited results. 
•    Investors may consider an investment with medium to long term perspectives.

ABOUT COMPANY:
Bharat Gears Ltd. (BGL) is a global supplier of automotive gears and automotive components. It manufactures a wide range of gears such as ring gears and pinions, transmission gears and shafts, differential gears, gearboxes majorly for the automotive industry. To keep pace with technology, BGL has invested in high end dry cut hobbing machines, dry cut bevel gear cutting machines as well as testing facilities. It also provides marketing services to a group company for marketing its automotive components.

The company's business operations and products primarily cater to the business-to-business segment. It maintains direct contact with the majority of customers which allows it to better understand the technical needs of the customers and also their future requirements. The company has three manufacturing facilities in India. Over the years the company has expanded its product portfolio to a broad spectrum of products including ring gears and pinions, transmission gears and shafts, differential gears, gearboxes, automotive clutch and components, turbochargers and components, driveline products, axle shafts, flywheel assemblies & rings, propeller shaft components, U-J cross, steering components, differential cages, steel wheel rims, sealed quench furnaces, pusher continuous gas carburising furnace, other heat treating equipment, etc.

ISSUE DETAILS:
The company is coming out with a rights issue (RI) of 930610 equity shares of Rs. 10 each with a fixed price of Rs. 105.00 per share to mobilize Rs. 9.77 cr. The company is offering 1 equity share for every 10 shares held as of the record date of October 29, 2021. The issue opens for subscription on November 22, 2021, and will close on December 06, 2021. Post allotment, shares will be listed on BSE and NSE. BGL will be spending Rs. 0.65 cr. for this RI process. From the residual portion, it will utilize Rs. 9.12 cr. for working capital needs. 

The issue is solely lead managed by Keynote Financial Services Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post this issue, BGL's current paid-up equity capital of Rs. 9.31 cr. will stand enhanced to Rs. 10.24 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 107.48 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, the company has posted turnover/net profits (loss) of Rs. 468 cr. / Rs. - (18.78) cr. (FY20), Rs. 504.40 cr. / Rs. - (7.70) cr. (FY21). For the first half of FY22 ended on September 30, 2021, (as per unaudited results) it has earned a net profit of Rs. 14.34 cr. on a turnover of Rs. 352.86 cr. As of September 30, 2021, its paid-up equity capital of Rs. 9.31 cr. is supported by free reserves of Rs. 79.27 cr. On the same date, the promoter's holding was 55.32%.

SCRIP PERFORMANCE: Based on BSE website data (Scrip code: 505688):
The scrip last closed on cum-rights basis at Rs. 173.45 on October 27, 2021, and opened on the ex-rights basis at Rs. 164.90 on October 28, 2021. Since then, it has marked high/low of Rs. 190.20 / Rs. 147.80, with the last closing price of Rs. 145.20 as of November 18, 2021. The scrip has marked the last 52 weeks' high/low of Rs. 190.20 / Rs. 47.24. Based on the last closing price, its market cap stands at Rs. 148.64 cr.