Bharat Gears RI review (Apply)

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•    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.

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.

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. 

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. 

Conclusion / Investment Strategy

The company suffered setbacks in line with general market trends for the automotive segment for FY20 and FY21. It is back on track as it appears from the H1 of FY22 results. The offer price appears reasonable based on its latest financial data. Investors may consider an investment with a medium to long term perspective in this known player in automotive gear segment.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Nov 18, 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.


More Bharat Gears Limited RI Views / Analysis / Recommendations ...

The Bharat Gears Rights Issue Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Bharat Gears Rights Issue worth investing. The Bharat Gears Rights Issue Note sets the Rights Issue expectations in systematic way which tells you if Bharat Gears Rights Issue good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Bharat Gears Rights Issue by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.