Divgi TorqTransfer Systems IPO Opens Today To Float ₹412 Crore

Automotive component manufacturer Divgi TorqTransfer Systems IPO opens today with a fresh issue of equity shares worth ₹180 crores plus OFS of 39.34 lakh shares.

The initial public offering of automobile component producer Divgi TorqTransfer Systems, which began on March 1 and will run until March 3, 2023, appears to be the beginning of the end of the mainboard IPO’s dry spell.

The price range has been set at 560 to 590 rupees per share. The business announced on Tuesday that it has secured over 185 crores from anchor investors in advance of its IPO.

According to BSE data as of 10:30 am on Day 1, the offer has been subscribed to 0.01 times, with the category for retail investors having been booked 0.06.

The Divgi TorqTransfer Systems’ initial public offering (IPO) consists of a new equity share issuance in the amount of 180 crore rupees and an offer for sale (OFS) of 39.34 lakh shares from investors and other selling shareholders.

The new issue’s proceeds will go towards meeting the company’s capital expenditure needs for the acquisition of equipment for its production facilities and other general business objectives.

Market watchers report that during the previous sessions, shares of Divgi TorqTransfer Systems were selling for a premium (GMP) of 60. On March 14th, the company’s equity shares were anticipated to list on the BSE and NSE stock exchanges.

A solid track record of revenue growth and profitability, with a CAGR of 21.23% and 28.30% between FY20 and FY22, underpins their business approach. 

From a valuation aspect, based on the FY22 numbers, the issue appears to be reasonably priced when contrasted to its listed counterparts. 

The company does, however, run a high danger of customer concentration (91% of revenues come from the top 5 customers, and 54% originate from just one). 

Since China and Russia are necessary for global sales, the corporation is exposed to the dangers of regional concentration.

Divgi is a company that develops and offers Dual Clutch Automatic Transmission (DCT), torque coupler, and transfer case solutions at the system level. It has 3 manufacturing and assembling plants situated across India.

Divgi has produced remarkable growth. The company’s EBITDA margins, which are now expanding consistently and are hovering around 28 percent, are promising. 

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In comparison to its listed competitors, Divgi TorqTransfer Systems’ IPO appears to be fairly priced at 36x PE predicated on post-issue annualized FY23 earnings.