Company and IPO Overview:
The Company Divgi TorqTransfer Systems Limited is amongst the very few automotive component entities in India who have the capability to develop and provide system level transfer case, torque coupler and dual clutch automatic transmissions (“DCT”) solutions. The company is one of the largest players supplying transfer case systems to automotive OEMs in India and the largest supplier of transfer case systems to passenger vehicle manufacturers in India. It is also the only player manufacturing and exporting transfer cases to global OEMs from India, and the only manufacturer of torque couplers in India. It also has the potential to develop and supply transmission systems for electric vehicles (“EVs”). The Company actively collaborates with Europe’s transmission engineering consulting firms like FEV and Hofer.
The company caters to the next generation of clients like Toyota, Mahindra & Mahindra, and Tata Motors. The company has stamped and established its global footprint being a trusted supplier to customers in UK and USA in the west to China, Thailand, Korea, and Japan in the east.
It manufactures and supplies a variety of products under the broad categories of
(i) torque transfer systems (which includes four wheel-drives (“4WD”) and all-wheel-drive (“AWD”) products);
(ii)Synchronizer systems for manual transmissions and DCT; and
(iii)Components for the above-mentioned product categories for torque transfer systems and synchronizer systems in manual transmission, DCT, and EVs.
It has also developed
(i) transmission systems for EVs;
(ii) DCT systems; and
(iii) Rear wheel drive manual transmissions.
It is one of the few companies who serve both as systems level solution provider as well as component kit supplier to global OEMs and Tier I transmission systems suppliers.
It is also one of the first few suppliers of steel and carbon-based synchronizer systems for the Indian markets, and is one of the leading manufacturers of steel synchronizers in India. The company is in the process of launching domestically manufactured DCT systems for the Indian market. Once launched, it will be the only manufacturer of DCT systems in India.
Divgi TorqTransfer Systems is a mainboard IPO which is going to raise around ₹412 crores via IPO that comprises fresh issue of ₹180 crores and offer for sale up to 3,934,243 equity shares of ₹5 each. The price band of the IPO is ₹560 to ₹590 with a market lot of 25 shares. The retail quota is 10%, QIB is 75%, and HNI is 15%.
Financials (rounded off)
Date | Total Revenue (₹ in cr) | PAT (₹ in cr) |
31/03/2020 | 171 | 28.04 |
31/03/2021 | 195 | 38.04 |
31/03/2022 | 242 | 46.15 |
Objectives of the Issue
Undertaking capital expenditure for the purchase of equipments, plants and machineries and other productive assets to facilitate expansion of its manufacturing facilities.
Using remaining funds to meet other necessary corporate purposes.
IPO Details
IPO Date | 01/03/2023-03/03/2023 |
Face Value | ₹5 per share |
IPO Price Band | ₹560-₹590 per share |
IPO Lot Size | 25 Shares |
Listing at | NSE, BSE |
Basis of Allotment | 09/03/2023 |
Credit of Shares in Demat | 13/03/2023 |
Listing Date | 14/03/2023 |
Pre-Issue Shareholding | 67.18% |
Post-Issue Shareholding | - |
Retail Minimum Lot Size | 25 shares (₹14,750) |
Valuations and Margins:
| FY20 | FY21 | FY22 |
EPS (Rs.) | 10.18 | 13.82 | 16.76 |
Debt/Equity | 0.24 | 0.00 | 0.00 |
ROCE (%) | 16.2 | 17.8 | 18.3 |
EBITDA (%) | 23.22 | 27.82 | 28.07 |
P/E Analysis of Divgi TorqTransfer Systems Limited:
P/E Ratio is 35x – Based on CY22 EPS is of Rs 16.76.
P/E Ratio is 40x – Based on last 3 years weighted EPS is of Rs 14.68
P/E Ratio is 32x – Based on 6 months ended Sep-22 EPS is of Rs 9.32.
The Company is asking IPO Price in the P/E ratio of 35.20x
Its listed peers like ZF Commercial Vehicle control system India ltd is trading at P/E 72x, Endurance Technologies ltd at 44x and Bosch ltd trading at 40x, Sona BLW precision forgings ltd at 71x. Hence, we can say as per facts and figures that the IPO Price is attractively priced.
Important things to note about the company:
The company seems to have a robust financial track record with consistent revenue and profit growth.
Niche market with high entry barriers and strong demand for its products.
Diversified customer base with over 54% revenue coming from exports.
Experienced management team with a focus on Research and Development (R&D) and new product development.
The debt to equity ratio has consistently decreased where as the return on capital has been increasing consistently so far.
Risk Factors in Divgi TorqTransfer Systems IPO
The company depends on a few large customers for a large portion of its revenue.
The company is very much exposed to risks such as currency fluctuations, changes in regulations, and competition.
There is very limited scope for diversification within the power transmission systems market.
Lastly, it is seen that even after 60 years in business, company's revenue is under ₹ 300 crores only.
Crisp Insights:
Grey Market Premium is currently ₹60.
Disclaimer: All information is provided for educational and informational purpose only. Data is fetched from publicly available sources such as the DRHP filed by the company. The website or the author takes no guarantee for the accuracy of the data however, we have tried our best to present accurate data to out readers. Please consult a financial advisor or do your own analysis before investing/trading in the stock market.
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