Precision Camshafts (PCL) initial public offering(IPO) is set to hit Dalal Streets on January 27. The objective of the issue is to establish a machine shop for ductive iron camshafts at the export oriented unit and meeting other general corporate purposes. At present, there are no listed companies in India that engage in the manufacturing of camshafts. The issue will close on January 29 (Friday).
Here are 10 key points you should know about the Precision Camshafts initial public offer (IPO):
1) About the company: PCL is one of the leading manufacturer and supplier of camshafts. It supplies over 150 varieties of camshafts for passenger vehicles, tractors, LCVs and locomotive engine applications from its manufacturing facilities in Solapur, Maharashtra. The company claims a long term relationship with several marquee global OEMs, such as General Motors, Ford Motors, Hyundai, Maruti Suzuki, Tata Motors and Mahindra & Mahindra. It generates significant portion of its revenue from export market (78 per cent of revenue in FY15). PCL has also successfully expanded its market share from 5 per cent-6 per cent in 2010 to 8 per cent-9 per cent in 2014.
2) About the issue: The IPO would be made through a fresh issue aggregating upto Rs 240 crore and an offer for sale of up to 95,10,000 equity shares of Rs 10 each.
3) IPO Price: Precision Camshafts has fixed the price band between Rs 180-186 per share for its IPO.
4) Analysts take: According to Reliance Securities, considering high margin, niche product, strong client relationship, high exposure in the export market, strong management and inorganic growth opportunities, investors can ‘Subscribe’ the issue from a long term perspective.
SMC Investment and Advisors in a research note said, “On the valuation front, the stock seems to pricey. Long term investors may subscribe to the issue.”
5) Financials: For the financial year ended March 2015, the company posted net profit of Rs 63.60 crore against Rs 14.1 crore last year. The company posted net profit of Rs 21 crore and Rs 24.90 crore in FY 12 and FY 13, respectively.
6) Objective of the issue: The object of the net proceeds of the fresh issue are establishment of a machine shop for ductile iron camshafts at the export oriented unit (EOU) in Solapur, Maharashtra at a cost of Rs 200 crore and for other general corporate purposes.
7) Lead managers: SBI Capital Markets, HDFC Bank and India Infoline are the book running lead managers to the issue.
8) Key Risks: According to Reliance Securities, the company is exposed to foreign currency risk as it generates significant proportion of its revenue via export (78.4% in FY15) from global customers. Return ratios may fluctuate in intermittent period due to ongoing capex. As it has already been generating significant high EBIDTA margin (26.5% in FY15), it requires adequate volume growth to maintain (or improve) EBIDTA margin from current levels.
9) Key growth drivers: According to the Reliance Securities, some of PCL growth drivers are shifting of its focus from low value product to high value product. The company has also secured orders for the new capacity. With organic growth, PCL can opt an inorganic route to stimulate overall growth and exclusive arrangement with EMAAG would aid PCL’s technological expertise.
10) Promoters: Yatin Shah and Suhasini Shah are the promoters of the company. Yatin has over 23 years of experience in the auto component manufacturing sector. On the other hand, Suhasini has over 23 years of work experience in management.