Tega Industries Ltd IPO - Information Note
Tega Industries is a 45-year old profit-making company catering to the mining and abrasives sector. It is a leading manufacturer and distributor of specialized and critical to operate consumable products for the global minerals, mining and abrasives industry. Tega has the distinction of being the world’s second largest producers of polymer based mill liners.
Tega Industries product portfolio includes abrasion and wear-resistant rubber, polyurethane, steel and ceramic based lining components etc.
The company has 6 plants of which 3 are in located in India and 3 are located abroad. More than 86% of the revenues of Tega Industries comes from the global market, with the balance from domestic markets.
Key terms of the IPO issue of Tega Industries
|
Key IPO Details |
Particulars |
Key IPO Dates |
Particulars |
|
Nature of issue |
Book Building |
Issue Opens on |
01-Dec-2021 |
|
Face value of share |
Rs.10 per share |
Issue Closes on |
03-Dec-2021 |
|
IPO Price Band |
Rs.443 - Rs.453 |
Basis of Allotment date |
08-Dec-2021 |
|
Market Lot |
33 shares |
Refund Initiation date |
09-Dec-2021 |
|
Retail Investment limit |
13 Lots (429 shares) |
Credit to Demat |
10-Dec-2021 |
|
Retail limit - Value |
Rs.194,337 |
IPO Listing date |
13-Dec-2021 |
|
Fresh Issue Size |
Nil |
Pre issue promoter stake |
85.17% |
|
Offer for Sale Size |
Rs.619.23 crore |
Post issue promoters |
79.17% |
|
Total IPO Size |
Rs.619.23 crore |
Indicative valuation |
Rs.3,003 crore |
|
Listing on |
BSE, NSE |
HNI Quota |
15% |
|
QIB Quota |
50% |
Retail Quota |
35% |
Data Source: IPO Filings
Here are some of the key merits of the Tega Industries business model
1) Tega has manufacturing sites in 3 of the world’s major mineral hotspots including Chile, Australia and South Africa.
2) It offers comprehensive mineral handling solutions and hence its activity, being post mining, does not gyrate with the mining capex cycles.
3) Global Private Equity major, Wagner, has an equity participation in Tega Industries, which it acquired in the year 2011.
4) Tega currently has a presence in 513 installation sites spread across more than 70 countries in the world.
5) Out of the 86.4% global revenue share, Latin contributes the bulk of 24.71% followed by Africa at 22.62% and Europe / Middle East at 15.49%.
6) As of fiscal 2021, Tega has installed capacity of 24,558 MT with the plants at Dahej in Gujarat and Samali in West Bengal are major contributors.
7) It has consistently improved profits despite operating at 58% capacity utilization so the scope for operating leverage is huge.
Check - Tega Industries IPO - 7 Things to Know
How is the Tega Industries IPO structured?
The IPO of Tega Industries is a total offer for sale (OFS) and here is the gist of the offer
a) The OFS component will comprise the issue of 1,36,69,478 shares and at the upper price band of Rs.453, OFS value works out to Rs.619.23 crore.
b) Out of the OFS of 136.69 lakh shares, promoters Madan Mohanka and Manish Mohanka will sell 33.15 lakh shares and 6.63 lakh shares respectively. Private Equity investor, Wagner, will sell 96.92 lakh shares in the OFS.
c) Post the offer for sale and the fresh issue, the promoter stake will come down from 85.17% to 79.17%. Public shareholding post-IPO will stand enhanced to 20.83%.
d) There will be no fresh funds coming into the company. The public issue is to give partial exit to promoters and early investors and to get the stock listed.
Key Financial parameters of Tega Industries
|
Financial Parameters |
Fiscal 2020-21 |
Fiscal 2019-20 |
Fiscal 2018-19 |
|
Sales Revenues |
Rs.805.52 cr |
Rs.684.85 cr |
Rs.633.76 cr |
|
EBITDA |
Rs.238.64 cr |
Rs.117.23 cr |
Rs.106.00 cr |
|
Net Profit / (Loss) |
Rs.136.41 cr |
Rs.65.50 cr |
Rs.32.67 cr |
|
Net Worth |
Rs.613.72 cr |
Rs.462.49 cr |
Rs.401.11 cr |
|
EBITDA Margins |
27.86% |
16.85% |
16.49% |
|
Return on Equity (ROE) |
22.23% |
14.16% |
8.14% |
|
Return on Capital Employed (ROCE) |
24.76% |
11.17% |
11.12% |
Data Source: Company RHP
Tega Industries has shown sales growth of 27% over 2019 while the EBITDA has more than doubled over 2019 while the net profits are up four-fold over FY-19. Tega reported ROE and ROCE of above 20% in FY21.
Tega Industries is expected to have a listing market cap of Rs.3,003 crore assigning a P/E ratio 22.01X on historical earnings. It will look more reasonably priced if you consider FY22 earnings and the non-cyclical nature of business plus its strong ROE and ROCE numbers.
Investment Perspective for Tega Industries
Here is what investors must consider before investing in the Tega Industries IPO.
a) The company operates in the post-mining support service, which makes its business model less vulnerable to the mining cycles.
b) The company uses strong technology that is backed by R&D and expertise, which provides a distinct an entry barrier for the company.
c) The 86% revenue share from global markets de-risks the business from the domestic demand and supply cycles, a major boon in the midst of COVID-19.
d) The profits are favourably impacted by the spike in mineral prices and that is evident in profit growth. Outlook remains positive with the economic recovery anticipated.
e) Deep relationships with global customers and a robust order book position of Rs.316 crore and growing as of June 2021.
The IPO of Tega Industries has been priced at 22 times its FY21 net profit and would look a lot more reasonable if the profit growth is extrapolated.
However, the resurgence of the B.1.1.529 variant has its origins in South Africa and could be a headwind. The stock is reasonably priced, but remains a high-risk investment idea.
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