Last updated on September 17th, 2021 at 11:18 am
Incorporated in the year 1981, Sansera is a supplier of connecting rods, rocker arms, and gear shifter forks for two-wheelers and four-wheelers. The company is based in Bengaluru, Karnataka. The products and services offered includes rocker arms, gear shifter forks, shafts, and crankshaft assemblies for automotive and aerospace industries.
It is entirely an offer for sale IPO and there is no fresh issue of shares.
Offer Details of Sansera Engineering Limited IPO
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| Offer Details | |
| Offer Size | Rs 1265-1283 crore |
| of which | |
| Fresh Issue | NIL |
| Offer for sale | upto 1,72,44,328 shares |
| Price Band | Rs 734-744 per share |
| Offer Period | Sep 14- Sep 16, 2021 |
| Offer Structure | QIBs: upto 50% of the offer NIIs: upto 15% of the offer RIIs : upto 35% of the offer |
| Market Lot | Minimum 1 lot; 20 shares (Rs 14,880) |
| Listing on | BSE, NSE |
| BRLM’s | ICICI Securities, IIFL Securities, Nomura Financial |
| Registrar | LinkIntime |
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Business Profile of Sansera Engineering
The company is an engineering-led integrated manufacturer of complex and critical precision engineered components across automotive and non-automotive sectors. In the automotive sector, the company manufactures and supplies a range of precision forged and machined components and assemblies, such as connecting rod, rocker arm, crankshaft, gear shifter fork, stem comp, and aluminum forged parts for the two-wheeler, passenger vehicle, and commercial vehicle verticals. In the non-automotive sector, the company manufactures and supplies a range of precision components for the aerospace, off-road, agriculture, and other segments, including engineering and capital goods.
For FY 21, the automotive sector contributed 88.45%, and non -automotive sector contributed 11.55% of revenue from the sale of products. Domestic sales contributed 64.98% and exports contributed 35.02% of revenues for FY21.
As on July 31, 2021, the company had 16 manufacturing facilities, of which 15 are in India in the states of Karnataka (Bengaluru, Bidadi, Tumkur), Haryana (Manesar), Maharashtra (Chakan), Uttarakhand (Pantnagar), and Gujarat (Mehsana), and one facility is in Trollhättan, Sweden.
The Issuer has manufactured in-house several complex machines. Most of the machines build, are modular by design and can be refurbished for other applications in case of a reduction in demand or phasing out of the product for which the machine was originally built, thereby reducing the capital expenditure requirements and de-risking the business model.
Financial Review
Total revenues for FY21 increased by 6.74% to Rs 1572.36 crore. This was due to the fact of the increase in revenues from the sale of products from new business. (sales of existing and new products to new customers and sales of new products to existing customers). It should be noted that there was a decrease in the revenue from the existing business. This decrease was due to the reduction in vehicle production in India and globally. Revenues in FY20 reduced by 10% to Rs 1473 crore from Rs 1640 crore due to the effect of pandemic and decrease in vehicle production.
The profitability margins are strong, EBITDA and Net Margin can be seen from the chart. Debt is 0.75x of equity as on 31st Mar 2021. Return on net worth is 12.51%, 10.40%, and 14.31% for FY21, FY20, and FY19 respectively.
Valuation and peer comparison
The Issue is priced at 35 times its earnings, with EPS of 21.02 and P/E calculated at the upper price band of Rs 744 per share. P/BV is 5.27x at NAV of Rs 170.78 per share as on 31st March 2021. The average P/E of the sector is 62x which signals that the Issue is fairly priced and leaves something on the table for investors. The peers of the Issuer are Endurance Technology, Minda Industries, Sundaram Fasteners, Suprajit Engg, Bharat Forge, Motherson Sumi, Mahindra SIE as per the RHP.
Investment Strategy
The Issuer’s financial profile is impacted by the pandemic in FY20 and there is a decrease in the business from the existing customers as well. The topline of Sansera shows volatility trends though the margins seem to be reasonable. The electrical vehicle segment is on the boom and poses a challenge over the auto segment. Hence though the Issuer has highlighted that they are apt to make any changes in their business owing to changes in the market but this depends on the future market conditions. The Issue is reasonably priced when compared to the peers. There are other upcoming IPOs as well in the market so one may wait and look for other IPOs. However, cash surplus investors may invest for short-term benefits.
Subscription Status of Sansera Engineering IPO
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| Subscription Status {no. of times (x)} | ||||
| Particulars | Shares Offered | 14th Sep | 15th Sep | 16th Sep |
| QIB | 34,23,442 | 0.29 | 0.38 | 26.47 |
| NII | 25,67,582 | 0.07 | 0.22 | 11.37 |
| Retail | 59,91,024 | 0.83 | 1.72 | 3.15 |
| Employees | 1,27,118 | 0.35 | 1.03 | 1.37 |
| Total | 1,21,09,166 | 0.51 | 1.02 | 11.47 |
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