Fundamentals justify IPO valuation though existing shareholders’ negative cost of holding may curb share prospects post lock-in.
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UNIPARTS INDIA OFFER AT A GLANCE |
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| Offer Type | Book Built |
| Platform | Main Frame |
| Fresh Issue | NIL |
| Offer for Sale | 14,481,942 (Rs 835 Cr) |
| Face Value | Rs 10 |
| Price Band | Rs 548 – 577 |
| Mkt/Bid Lot | 25 Nos. |
| Market Cap | Rs 2,604 Cr |
| Equity Cap | Rs 45.13 Cr |
| Implied Free Float | 34.21% |
| Lead Manager | Axis Capital, DAM Capital and JM Financial |
| Registrar | Link Intime |
| Listing At | BSE, NSE |
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INDICATIVE ISSUE SCHEDULE |
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| Opening : 30-Nov-2022 | Closing : 02-Dec-2022 |
| Allotment : 07-Dec-2022 | Refunding : 08-Dec-2022 |
| Demat Credit : 09-Dec-2022 | Trading : 12-Dec-2022 |
New Delhi-registered and Noida-headquartered Uniparts India Ltd (UIL) is floating an IPO of 14,481,942 shares valued about Rs 835 Cr at the cap price. The IPO is, in fact, an offer for sale from three promoter group shareholders and sixteen others from the public category. The offer is being made through the book-building route with a price band of Rs 548-577 for Rs 10 paid-up share.
Applicants should bid for a minimum lot of 25 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE and NSE on December 12, 2022. Axis Capital, DAM Capital Advisors and JM Financial are acting as the lead managers to the offer and Link Intime has been roped in as registrar to the issue. The bidding opens on Wednesday, November 30 and closes on, Friday, December 2, 2022.
The objects of the IPO are to achieve the benefits of listing the shares on the stock exchanges and to provide the exit route for the existing shareholders of the company.
Lineage
Though incorporated in 1994 by Gurdeep Soni and his brother Paramjit Singh Soni along with their associates, UIL commenced sales only in 2000 with the establishment of its first facility for 3-point linkages (3PL) in Noida, Uttar Pradesh. UIL was initially catering to John Deere in India, Spain and USA. In 2004 it commenced sales to OEMs in Japan.
The company consolidated various businesses in 2005 and commenced manufacturing products for the PMP (precision machine parts) vertical in 2006. It started manufacturing hydraulic cylinder components in one of the Noida facilities in 2007 and commenced operations at the manufacturing facility located at Visakhapatnam, Andhra Pradesh in 2008.
UIL is rated today as a global manufacturer of engineered systems and solutions and is said to be one of the leading suppliers of systems and components for the off-highway market in the agriculture, construction, forestry and mining sectors. The company had an estimated 16.68% market share of the global 3PL market in Fiscal 2022 in terms of value and an estimated 5.92% market share in the global PMP market in the Construction-Forestry-Mining (CFM) sector. UIL also caters to the aftermarket segment especially for 3PL product range. The company provides replacements of 3PL parts to organized aftermarket retailers and distributors in North America, Europe, South Africa and Australia.
Key Management
Promoter Gurdeep Soni (67) is the Chairman and Managing Director of the company. He holds a master’s degree in management studies from the Birla Institute of Technology and Science, Pilani, Rajasthan. He has 42 years of work experience including 27 years of experience in different roles within the Uniparts Group.
Co-promoter Paramjit Singh Soni (62) is an Executive Director and Vice Chairman of the company. He holds a bachelor’s degree in commerce and has 40 years of work experience including 27 years of experience as a Director of UIL. He is presently based in the USA.
German national Herbert Coenen, who holds a diploma from the University of Applied Science, Cologne, Germany in mechanical engineering, is a Non-Executive Director of the company. He has over 35 years of work experience, of which 20 years were with GKN Walterscheid GmbH. He is associated with the Uniparts Group since May, 2005 and has played a key role in business development, business expansion and technology adoption of UIL and its Subsidiaries outside India. He is also the managing director of UIL’s subsidiary, Uniparts India GmbH.
Harjit Singh Bhatia is on the board as a nominee of Ashoka Investment Holdings Ltd and Ambadevi Mauritius Holding Ltd. He has over 41 years of experience across various sectors, and has previously been associated with the State Bank of India, Credit Suisse Services, Deutsche Bank and PineBridge Investments Singapore.
Stakeholders
Of the pre-IPO equity capital of Rs 45.13 Cr, the promoter group holds 75.54% of which CMD Gurdeep Soni has 19.93% while his brother and Vice-Chairman Paramjit Singh Soni holds just 0.44%. Selling promoters together hold 29.69% of the stake, which includes CMD’s spouse, Pamela Soni who holds 6.65%, while Meher Soni 2018 CG-NG Nevada Trust and Karan Soni 2018 CG-NG Nevada Trust hold 11.52% each. The institutional-cum-selling shareholders, Ashoka Investment Holdings and Ambadevi Mauritius Holding, hold 15.91% and 4.77% respectively and the rest (3.78%) is held by other selling shareholders and employees under the public category.
Post IPO the promoters will hold 65.79%, of which the Soni brothers will hold the same percentage of stake while Pamela Soni will have 1.77%. Meher Soni 2018 CG-NG Nevada Trust and Karan Soni 2018 CG-NG Nevada Trust will hold 9.08% each. Post offer for sale, the average cost of holding for both the trusts will be negative Rs 154.80 per share and for Pamela Soni it will be a negative Rs 1563.24 per share!
Business
UIL is a concept-to-supply player for precision products for off-highway vehicles with presence across the value chain. Its product portfolio includes core product verticals of 3-point linkage systems and precision machined parts as well as adjacent product verticals of power take off, fabrications and hydraulic cylinders or components thereof. Most of its products are structural and load bearing parts of the equipment and are subject to strict tolerances, specifications and process controls.
In fiscal 2022, revenue generated from the agriculture and CFM segments together constituted 95.35% of its total revenue. UIL’s customer base comprises a number of global OEMs. The company claims to have long-term relationships with global OEM players in the agriculture and CFM sectors, such as Tractors and Farm Equipment Ltd (TAFE), Doosan Bobcat North America (Bobcat), Claas Agricultural Machinery Private Ltd (Claas Tractors), Yanmar Global Expert Co., Ltd (Yanmar) and LS Mtron Ltd.
The company reportedly services several organized aftermarket players and large farm and fleet retail store chains in Europe and the US, such as Kramp Groep B.V. (Kramp) and Tractor Supply Company (TSC). In fiscal 2022, its customer base comprised over 125 customers in over 25 countries. Bobcat, TAFE and Kramp are some of the customers with whom UIL has had relationships for over 15 years.
Financial Track
Unlike in the previous two years, UIL has posted a highly encouraging performance in fiscal 2022. The company’s top line, which declined from Rs 1061 Cr in fiscal 2019 to Rs 903 Cr in fiscal 2021 surged to Rs 1227 Cr in fiscal 2022 and operating profit which slipped from Rs 141 Cr in 2019 to Rs 93 Cr in 2020 shot up to Rs 254 Cr in 2022. Operating margin leapt from 10.2% to 20.7% during this period.
The company’s net profit has pole-vaulted from Rs 63 Cr in 2020 to Rs 167 Cr in 2022 while its equity capital has remained unchanged at Rs 45 Cr. Reserves have steadily increased from Rs 377 Cr to Rs 641 Cr in last three years through earned surplus and borrowings have been reduced from Rs 346 Cr to Rs 115 Cr.
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Uniparts India Consolidated Financials (in Cr) |
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| Period Ended |
Jun-22 |
Mar-22 | Mar-21 | Mar-20 |
Mar-19 |
| Months |
3 |
12 | 12 | 12 |
12 |
| Revenue |
347 |
1227 | 903 | 907 |
1061 |
| Operating Profit |
72 |
254 | 114 | 93 |
141 |
| OPM% |
20.8 |
20.7 | 12.6 | 10.2 |
13.3 |
| Other Income |
1 |
4 | 45 | 32 |
2 |
| EBIDTA |
73 |
257 | 158 | 125 |
143 |
| EBIDTA % |
21.8 |
21.8 | 17.3 | 13.7 |
14 |
| Interest |
1 |
6 | 8 | 18 |
18 |
| Depreciation |
10 |
37 | 37 | 35 |
30 |
| Except Item |
3 |
15 | 6 | 3 |
-3 |
| Tax |
16 |
66 | 24 | 13 |
20 |
| Net Profit |
51 |
167 | 93 | 63 |
70 |
| Equity |
45 |
45 | 45 | 45 |
45 |
| Reserves |
669 |
641 | 516 | 420 |
377 |
| Borrowing |
115 |
127 | 128 | 257 |
346 |
| Fixed Assets |
264 |
265 | 266 | 290 |
304 |
Valuation
As regards IPO price, the cap price of Rs 577 discounts the company’s earnings about 17 times, book value 3.7x and EBIDTA 10x which compare well with some of the popular listed peers. One factor that may alter the stock’s future course is the existing shareholders negative cost of their residual holdings. Another point to ponder is sixteen out of the 22 shareholders under the public category, including the two institutional investors, are completely exiting from the company through the offer for sale.
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HOW UNIPARTS COMPARES WITH SELECT LISTED PEERS |
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Financials |
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| (Amount in Cr) |
Uniparts |
Bharat Forge | Ramkrishna Forgings |
Automotive Axle |
| Market Cap |
2604 |
40026 | 3637 |
3059 |
| Borrowing |
127 |
5655 | 1591 |
15 |
| Fixed Assets |
265 |
5944 | 1598 |
262 |
| Revenue |
1227 |
10461 | 2320 |
1491 |
| Other Income |
4 |
196 | 1 |
4 |
| EBIDTA |
257 |
2212 | 518 |
139 |
| Interest |
6 |
160 | 96 |
2 |
| Net Profit |
152 |
1018 | 200 |
74 |
| Equity Cap |
45 |
93 | 32 |
15 |
| Reserves |
669 |
6478 | 1046 |
606 |
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Stock Features |
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| Current Price (Rs) |
577 |
860 | 228 |
2024 |
| Face Value (Rs) |
10 |
2 | 2 |
10 |
| Book Value |
158 |
141 | 67 |
411 |
| Promoter Stake % |
65.8 |
45.3 | 46.3 |
71.0 |
| Debt/Equity |
0.2 |
0.9 | 1.5 |
0.0 |
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Profitability |
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| OPM % |
20.7 |
19.3 | 22.3 |
9.0 |
| Net Margin % |
12.4 |
9.5 | 8.6 |
5.0 |
| Cash EPS |
41.88 |
37.64 | 23.08 |
73.30 |
| Earnings Per Share |
33.76 |
21.96 | 12.49 |
49.20 |
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Return |
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| RONW % |
21.3 |
15.5 | 18.5 |
12 |
| ROCE % |
26.2 |
12.1 | 13.1 |
16.1 |
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Discounting |
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| Price/Earnings |
17.1 |
39.2 | 18.2 |
41.1 |
| Price/Cash EPS |
13.8 |
22.8 | 9.9 |
27.6 |
| Price/Book Value |
3.7 |
6.1 | 3.4 |
4.9 |
| Price/EBIDTA |
10.1 |
18.1 | 7.0 |
22.0 |
| Price/Revenue |
2.1 |
3.8 | 1.6 |
2.1 |
| Price/Fixed Assets |
9.8 |
6.7 | 2.3 |
11.7 |
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Distribution |
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| Dividend % |
56 |
350 | 10 |
150 |
| Yield % |
1.0 |
0.8 | 0.1 |
0.7 |
| Pay-out % |
16.6 |
32.0 | 11.2 |
30.5 |