Uniparts India Limited incorporated on September 26, 1994, is a global manufacturer of engineered systems and solutions, and it is one of the leading suppliers of systems and components for the off-highway market in the agriculture and construction, forestry and mining, and aftermarket sectors on account of their presence across over 25 countries. It is a concept-to-supply player for precision products for off-highway vehicles with a presence across the value chain. Their 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. They have a leading presence in the manufacture of 3PL and PMP products globally on account of them serving some of the largest global companies. Most of the Company’s products are structural and load-bearing parts of equipment and are subject to strict tolerances, specifications, and process controls.
The company has 5 manufacturing facilities, 2 at Ludhiana, 1 at Visakhapatnam, and 2 at Noida. They also have set up a distribution facility in Noida. In the United States, they have a manufacturing, warehousing, and distribution facility at Eldridge, Iowa, acquired in 2005 by Olsen Engineering LLC, now known as Uniparts Olsen Inc. (“UOI”), and a warehousing and distribution facility at Augusta, Georgia. Uniparts provides replacements of 3PL parts to organized aftermarket retailers and distributors in North America, Europe, South Africa, and Australia.
Promoters & Shareholding:
Gurdeep Soni and Paramjit Singh Soni are the company promoters.
|Pre Issue Share Holding
|Post Issue Share Holding
Public Issue Details:
Offer for sale: OFS of approx. 14,481,942 equity shares at Rs. 10, aggregating up to Rs. 835.61 Cr.
Total IPO Size: Rs. 835.61 Cr.
Price band: Rs. 548 – Rs. 577.
Objective: To carry out the offer for sale and achieve the benefits of listing.
Bid qty: minimum of 25 shares (1 lot) for Rs. 14,425 and maximum of 13 lots.
Offer period: 30th Nov 2022 – 2nd Dec 2022.
Date of listing: 12th Dec 2022.
- Leading market presence in the global off-highway vehicle systems and components segment.
- The company provides comprehensive solutions and manufactures high-quality, critical products and components for the OHV industry.
- Long-term relationships with key global customers, including major original equipment manufacturers.
- Professional and experienced management team.
- The business is impacted by cyclical effects in the global and domestic economy.
- The company is exposed to foreign currency exchange rate fluctuations as it has major international clients.
- The company depends on a limited number of customers for a significant portion of its revenues.
Subscribe or avoid?
Sectorial outlook – The Global market for 3-point linkages – estimated at $360 -370 million in 2021 – is expected to grow at nearly 6%-8% in 2021-2026, buoyed by robust growth in tractor production volumes in North America, India, and Europe, steady growth in China and Japan. In 2021, nearly 50% of the global production of tractors takes place in India, followed by 12% in China. Comparatively adolescent by world standards, India’s tractor market has expanded at a spectacular pace in the last few years. For a long time since Independence, the market was dominated by mid-sized tractors with engine capacities of 30-40 HP. But it has diversified in recent years, which is evident in the rising demand for both bigger (over 50 HP) and smaller (below 20 HP) tractors. With a growing need for greater precision in farm operations, especially in areas where intensive multi-crop farming is performed, demand for tractors of different sizes and utility values is bound to increase. Another factor driving demand for higher HP tractors is the upgradation by farmers to allow mechanization with rotary tillers and similar equipment. Significant demand had been generated by applications in haulage and construction. All of the above are expected to positively impact the sector the company is operating in the long term.
The financials (revenue and net profit) are shown in the graph below:
Valuation – For the last 3 years average EPS is Rs. 23.83 and the P/E is around 35x on the upper price band of Rs. 836. The EPS for FY22 is Rs. 36.98 and the P/E is around 22.6x. If we annualize Q1-FY23 EPS of Rs. 11.19, P/E is around 18.6x. It has Balkrishna Industries Ltd (28.1x), Bharat Forge Ltd (41.1x), and Ramkrishna Forging Ltd (14.7x) as its listed peers as per the RHP. The company’s P/E is between 22.6x and 35x. Net margins and EPS have been growing consistently. Looking at the valuation, it seems to be reasonable.
Recommendation – The company has a niche space in the segment, it is a global manufacturer of engineered systems. It also has a significant backward and forward integration that reduces its dependence on external supply and support services. After considering all the factors the listing still seems reasonable with good prospects hence we would recommend “Subscribe” to this IPO for investors from a medium to long-term perspective.
This article should not be construed as investment advice, please consult your Investment Adviser before making any investment decision.
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