GNA Axles IPO is set to hit capital markets on Wednesday (September 14) to raise around Rs 130 crore. The auto component maker has fixed a price band of Rs 205–207 per share. The company has garnered approximately Rs 38 crore from anchor investors on Monday by selling shares at the upper price band. The IPO comprises an issue of up to 63 lakh shares. The public offer will close on September 16.
Below are 10 things you should know before investing in GNA Axles IPO:
1) About the company: Jalandhar-based GNA Axles is among the leading manufacturers of rear axle shafts used in on-highway and off-highway vehicular segments in India. The company is a manufacturer of machined forged products such as rear axle shaft, spindles and other speciality shafts.
2) Promoters: Jasvinder Singh Seehra, Ranbir Singh and Gurdeep Singh are the promoters of the company.
3) Objective of the issue: The company will utilise the net proceeds for purchasing plants and machineries, meeting working capital requirement and for general corporate purposes.
4) Listing: Shares of the company are proposed to be listed on BSE and NSE both.
5) Expected segmental growth: According to Reliance Securities, GNA Axles continues to sustain its leadership position in fast growing rear axle shaft segment, which is expected to grow by 13 per cent CAGR over next five years.
6) Lead managers: PNB Investment Services Ltd and Ambit Private Ltd are the book running lead managers to the issue.
7) Key Risks: According to market experts, GNA is largely dependent on very few products, given rear axle shaft generated 83.6 per cent of its revenue in FY16. Though the business can generate around 20 per cent RoE, the return ratios may come in pressure as the new investment would take at least 1-1.5 years to contribute to revenue.
8) Global footprint: The company’s export revenue is constituted by America (around 49 per cent), Europe (around 33 per cent), the Asia Pacific (18 per cent), and the balance is accounted by Australia. Exports constitute nearly 55 per cent of the company’s total revenue. The company’s major clients include Meritor HVS AB, John Deere, Transaxle Manufacturing of America, Dana Ltd and Kubota Corporation.
9) Financials: For the financial year ended March 31, 2016, the company reported a net profit of Rs 25.96 crore, up 20.17 per cent, against Rs 21.60 crore a year ago. The company reported a net profit of Rs 13.26 crore, 4.81 crore and 16.93 crore in FY14, FY13 and FY12, respectively.
10) Should you invest: Reliance Securities in a research note said, “The IPO is decently valued (17xFY16 diluted earnings). Thus we believe that it would get adequate response, given present auto ancillary stocks are in investors’ demand on improved prospects of overall automobile industry. We recommend ‘Subscribe’ to the issue with an eye on listing gain on the basis of stable EBITDA margin, presence in niche segment and healthy revenue from overseas sales and a supportive balance sheet.”
According to Angel Broking, high export revenue composition, expected recovery in domestic sales and the company’s market leadership position in the tractor segment; plus, given the relatively attractive valuation proposition, the brokerage house has recommended a ‘Subscribe’ on the issue.