Endurance Technologies IPO hit capital markets on Wednesday to raise Rs 1,149.43 crore to Rs 1,161.73 crore at a price band of Rs 467-472 per share. The public issue is an offer for sale (OFS) of 2.46 crore shares. Actis Components and System Investments (a private equity firm) and Anurang Jain (promoter) are selling 1.93 crore and 0.53 crore shares, respectively. The IPO will close on October 7. Axis Capital and Citigroup Global Markets are the book running lead managers to the issue. The comany has raised over Rs 348 crore by allotting shares to anchor investors.
Investors can bid for a minimum quantity of 30 shares and in multiples of 30 shares thereafter. Shares of the company are proposed to be listed on the BSE and the NSE.
Below are 5 things you should know before investing in the public offer:
1) About the company: Endurance Technologies is an Aurangabad based auto ancillary company with presence in India and Europe. The company was officially incorporated as Anurang Engineering Company Private Ltd by Anurang Jain in 1985 and was supplying aluminum die casts to Bajaj Auto in its initial years. Later, company started suspension products in 1996, transmission products in 1998 and brake systems in 2004. Starting from one manufacturing facility in 1985, the company currently operates 25 manufacturing facilities in India and Europe. The company expanded its operations in European auto ancillary sector by acquiring three companies in Italy and Europe. Endurance’s clients are Bajaj Auto, Honda Motorcycle and Scooter India Private Ltd, Hero Motorcorp Ltd, India Yamaha Motor Private Ltd, Royal Enfield, Tata Motors, FCA Italy S.p.A, etc. The company is prominently 2-wheeler and 3-wheeler component supplier in India and 4-wheeler auto component supplier in Europe.
2) Financials: From FY12-16, Endurance Technologies total revenue grew at a CAGR of 8.2 per cent and net profit grew at 12.3 per cent.
3) Key Concerns:
· Capital-intensive business
· Margins seems to be largely capped despite being stable
· Restricted pricing power as it has an OEM dependent business model
· Performance is solely dependent on the performance of the OEMs it caters to
· Underlying forex risks as Endurance Tech generates 30 per cent of its business from overseas
4) Valuations: According to Sharekhan, at a price band of Rs 467-472, the issue is priced at 22.6-22.8 times its price-earnings (PE) ratio for FY2016 consolidated Earnings Per Share (EPS) of Rs 20.7. Endurance Technologies is a large Tier-1 auto ancillary player, having a fairly diversified product portfolio. The company has been able to consistently maintain its operating performance (operating profit margins have been in 13-14 per cent range) and robust return ratios (in excess of 20 per cent) over the last 4-5 years.
5) Should you invest: Brokerage firm Angel Broking has ‘Subscribe’ rating on the issue and believes that the issue is fairly priced at the current valuation considering its growth initiatives, scalability in operations, focus on profitability and strong RoE profile.
Reliance Securities has also given ‘Subscribe’ rating to the issue. It said, “Considering its bulky size, large-sized OEM customers, premium motorcycle play, high-margin European business, healthy return ratios, sustainable EBITDA margin and organic as well as inorganic growth opportunity, we recommend to subscribe to the IPO with a long-term time horizon.”