Review by ProcapitalAkash
With its third effort at an IPO, UIL finally sees the light of day. Meanwhile, it reported growth in both top and bottom lines. Based on the issue’s most recent financial results, the price is fair. Investors should think about using a medium- to long-term reward approach when they invest.
In 2014, Uniparts India Ltd. began attempting to list its first stock on the stock market. In September 2014, it submitted its first DRHP for an issue of 13040,000 shares, including a new equity issue of 7000000 shares and the remaining shares through an OFS. The BRLMs for this issuance were India Infoline Ltd., Edelweiss Fin., and ICICI Securities. However, it lacked a public offering and chose not to proceed with the IPO. Then, in December 2018, it submitted a new DRHP for a new equity offering for Rs. 100 crore and an OFS for 13060770 shares with a new group of BRLMs, namely Axis Capital, Motilal Oswal Invest, and SBI Capital Market, but this issue was also abandoned. Then, in April 2022, it once more submitted a new DRHP with a new group of BRLMs, namely Axis Capital, DAM Capital, and JM Financial, for an OFS of 15731942 shares. And now, based on RHP, it is finally attempting to issue 14481942 shares via OFS, reducing the size of the issue. But throughout all of these filings, Link Intime India Pvt. Ltd. remained the registrar. Surprisingly, it has experienced growth in both its top and bottom lines during these times, which has proven to be a “Blessing in disguise” for it in terms of obtaining higher values.
ABOUT COMPANY: Due to its presence in more than 25 countries, Uniparts India Ltd. (UIL), a global manufacturer of engineered systems and solutions, is one of the top suppliers of systems and components for the off-highway market in the agriculture, construction, forestry, and mining (“CFM”), and aftermarket sectors (Source: CRISIL Report).
UIL is a concept-to-supply player with a presence throughout the value chain for off-highway vehicles (“OHVs”) precision products. Its product range consists of adjacent product verticals such as fabrications, power take-off, and hydraulic cylinders or their parts, as well as core product verticals such as 3-point linkage systems (3PL) and precision machined parts (PMP). Due to its experience working with some of the biggest worldwide corporations, it has a dominant presence in the production of 3PL and PMP products on a global scale (Source: CRISIL Report). The majority of UIL’s products are load-bearing, structural components of the equipment that must adhere to exact tolerances, specifications, and process controls. The production of these items involves a number of precise engineering process processes.
According to estimates, UIL will hold a value-based 16.68% market share of the global 3PL market in fiscal 2022 and a value-based 5.92% market share of the global PMP market in the CFM sector. Additionally, it serves the aftermarket market, particularly for the 3PL product line. In North America, Europe, South Africa, and Australia, the company supplies organised aftermarket dealers and distributors with replacement 3PL parts.
From idea, development, and validation to implementation and product manufacture, UIL provides completely integrated engineering solutions. In the conception phase, market research, customer needs analysis, and the creation of tailored customer strategies are all done. The design, acquisition, and processing of materials are all part of the development phase. Its products gain indirect access to a substantial network of retail locations across regions for aftermarket components by way of supplying aftermarket segment consumers. The “will-fit” components market, sold to distributors and retail chain stores, is the focus of this aftermarket category.
UIL had a global presence as of June 30, 2022, and it served clients in India as well as nations in North and South America, Europe, Asia, and Australia. It has five manufacturing sites in India: two in the Punjabi city of Ludhiana, one in the Andhra Pradeshi city of Visakhapatnam, and two in the Uttar Pradeshi city of Noida. Additionally, it has built a distribution centre in Noida, Uttar Pradesh. As part of the 2005 acquisition of Olsen Engineering LLC, now known as Uniparts Olsen Inc. (“UOI”), UIL acquired a manufacturing, warehousing, and distribution plant at Eldridge, Iowa, as well as a warehousing and distribution site at Augusta, Georgia. Additionally, it has established a warehouse and distribution centre in Hennef, Germany, which serves as its hub for catering to important European clients. Each of UIL’s facility is thoughtfully situated close to a number of international OEMs in the OHV sector.
It has 2,156 employees as of June 30, 2022, of which 686 were in the regular staff category and 1,474 were in the regular labour category.
Issue information and capital history
In order to profit from listing benefits and give some of its current shareholders a way out, UIL is launching its first secondary offering, a pure offer for sale (OFS), of 14481942 equity shares worth Rs. 10 apiece, through the book-building mechanism. It has a price range of Rs. 548–Rs. 577 announced and is considering raising Rs. 835.61 cr. at the higher price range. The subscription period for this issue begins on November 30, 2022, and ends on December 2, 2022. Applications must be made for at least 25 shares, then in multiples of that number moving forward. Shares will be listed on BSE and NSE after allotment. The issuance constitutes 32.09% of the post-issue paid-up capital of the corporation. UIL has allotted 50% for QIBs, 15% for HNIs and 35% for Retail investors.
The joint Book Running Lead Managers (BRLMs) of this issue are Axis Capital Ltd., DAM Capital Advisors Ltd., and JM Financial Ltd., while Link Intime India Pvt. Ltd. is the registrar of the issue.
Having issued initial stock at par, the business issued further equity shares in the price range of Rs. 45.00 to Rs. 294.75 between February 2007 and April 2014. It has also issued bonus shares in the ratio of 2 for 5 in February 2007, and 1 for 1 in April 2014. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 6.27, Rs. 9.85, Rs. 9.97, Rs. 88.45, Rs. 105.64, Rs. 105.74, and Rs. 147.36 per share.
This being a pure OFS, UIL’s paid-up capital following this IPO will stay the same at Rs. 45.13 cr. Based on the upper price band of the IPO, the company is going for a market valuation of Rs. 2604.22 cr.
FINANCIAL PERFORMANCE: On the financial performance front, during the last three fiscals, UIL has (on a consolidated basis) posted a turnover/net profit of Rs. 938.84 cr. / Rs. 62.64 cr. (FY20), Rs. 947.69 cr. / Rs. 93.15 cr. (FY21), and Rs. 1231.04 cr. / Rs. 166.89 cr. (FY22) (FY22). For Q1 of FY23, it achieved a net profit of Rs. 50.52 cr. on a turnover of Rs. 347.76 cr. Thus for the last 15 months, it has witnessed strong improvements in its top and bottom lines. The management is confident in preserving the trends. Thus IPO is decently priced.
For the last three fiscals, UIL has reported an average EPS of Rs. 27.68 and an average RoNW of 19.97%. The issue is priced at a P/BV of 3.65 based on its NAV of Rs. 158.15 as of June 30, 2022.
If we annualize FY23 earnings and assign it to post-IPO paid-up equity capital, then the asking price is at a P/E of roughly 12.89.
DIVIDEND POLICY: The corporation paid a dividend of 33% (FY21) and 92% (FY22) (FY22). It will establish a sensible dividend policy post-listing, based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS: As per the offer documents, UIL has shown Balkrishna Ind., Bharat Forge, and Ramkrishna Forgings as their listed peers. They are now trading at a P/E of 27.49, 37.89, and 14.55 (as of November 25, 2022). (as of November 25, 2022). However, they are not actually comparable on an apple-to-apple basis.
MERCHANT BANKER’S TRACK RECORDS:
The three BRLMs affiliated with the offer have handled 68 public issues in the past three years, out of which 25 issues closed below the offer price on the listing date.
Conclusion / Investment Strategy
UIL is enjoying a niche place in
the segment it is operating. Based on its latest financial performance,
the issue is competitively priced. Investors may consider depositing
funds for medium to long-term gains.
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