Sansera Engineering
is an engineering-led integrated manufacturer of complex and critical precision
engineered components across automotive and non-automotive sectors. Within the
automotive sector, company manufacture and supply a wide range of precision
forged and machined components and assemblies, such as connecting rod, rocker
arm, crankshaft, gear shifter fork, stem comp, and aluminium forged parts, that
are critical for engine, transmission, suspension, braking, chassis and other
systems for the two-wheeler, passenger vehicle and commercial vehicle
verticals.
Within
the non-automotive sector, company manufacture and supply a wide range of
precision components for the aerospace, off-road, agriculture and other
segments, including engineering and capital goods.
As of
April 30, 2021, 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.
Company's
plan to construct a Greenfield manufacturing facility in Bangalore dedicated to
aerospace and defense and, this facility is expected to be commissioned during
Fiscal 2023.The estimated cost to build the new plant is Rs 20 crore. Once this
new facility is built, company will move the machinery currently in Plant 9 to
the new plant and close Plant 9.
Company
supplies most of its products directly to OEMs in finished (forged and
machined) condition. For Fiscal 2021, company derived 88.45%, and 11.55% of
total revenue from sale of products from the automotive sector and
non-automotive sectors, respectively.
For
Fiscal 2021, company derived 64.98% of its total revenue from sale of products
from India and 35.02% of its revenue from sale of products from Europe, USA and
other foreign countries combined.
Company
is one of the top 10 global suppliers of connecting rods within the light
vehicle segment (passenger vehicles with gross vehicle weight of 3.5 tonnes or
less) and one of top 10 global suppliers of connecting rods within the
commercial vehicle (CV) segment for CY 2020.
Company
has been witnessing healthy market share gains in connecting rods in terms of
production volume for (1) Light Vehicles with a global market share of 2.3% in
CY 2020 compared to a global market share of 0.9% in CY 2015 and (2) CVs with a
global market share of 3.0% in CY 2020 compared to a global market share of
0.9% in CY 2015.
For
Fiscals 2021, 2020 and 2019, company’s revenue from sale of products to the
two-wheelers segment was 50.39%, 50.30% and 47.60% of total revenue
respectively, its Revenue from sales of products to the passenger vehicles
segment was 24.12%, 23.29% and 24.04% of total revenue respectively and its
revenue from sale of products to the commercial vehicle segment was 13.14%,
12.99% and 14.77% of total respectively.
Company
has an active pipeline of products under development, including (1) suspension
and drive train components for electric two-wheelers, (2) braking system
components for passenger vehicles, (3) machined engine casings for aerospace
and (4) components for power transmission within non-automotive applications.
Company
intends to develop multiple technology driven systems and components to cater
to growing opportunities in electrification of vehicles. Company is in the
process of setting up a dedicated facility for hybrid and electric components
in Plant 2, which is expected to be commissioned during Fiscal 2022.
Offer and its objects
The IPO will be complete offer for
sale of Rs 1282.98 crore by existing shareholders-Client Ebene Limited, CVCIGP
II Employee Ebene Limited, S Sekhar Vasan, Unni Rajagopal K, F R Singhvi and D
Devaraj.
Price band for the IPO is Rs 734 to
Rs 744 per equity share of face value Rs2 each.
Company will not directly receive
any proceeds from the Offer, and all the Offer Proceeds will be received by the
Selling Shareholders, in proportion to the Offered Shares sold by them.
Promoters of the CompanyareS Sekhar
Vasan, F R Singhvi, Unni Rajagopal K and D Devaraj. Promoters and promoter group hold
an aggregate of 22,558,375 equity Shares, aggregating to 41.98% of the pre-Offer
issued and paid-up Equity Share capital.The post IPO shareholding for the same
is expected to be around 34.96%.
The issue, through the book-building process, will open on 14
September 2021 and will close on 16 September 2021.
Strengths
Company is a leading supplier of complex and high-quality
precision engineered components that is gaining market share across automotive
and non-automotive sectors.
Company has
a track record of delivering strong
financial performance, its total operating income (revenue from operations) has
grown at a CAGR of 12.8% from Fiscals 2016 to 2020 as compared to the average
CAGR of 7.4% for the top 10 listed auto-component manufacturers in India by
market capitalization, in the same period.
Company's business model is well diversified by geographical
spread of revenues and product portfolio. Company derives its revenue from
multiple segments within the automotive sector, including the two-wheeler,
passenger vehicle and commercial vehicle verticals.
Company has long-standing relationships with well-known
Indian and global OEM customers. Within India, its customers include nine of
the top 10 two-wheeler OEMs and the leading passenger vehicle OEM based on
production volume for Fiscal 2021. Globally, its customers include six out of
top 10 global Light Vehicle OEMs and three of the top 10 global MHCV OEMs based
on production volumes for CY 2020.
Company is well placed to strengthen its global market share
in existing automotive product portfolio and diversify into new products to
cater to the expected increase in electrification of vehicles.
Within India, company is the largest
supplier of (i) connecting rods, crankshafts, rocker arms and gear shifter
forks for two-wheelers OEMs and (ii) connecting rods and rocker arms for
passenger vehicle OEMs.
Company's automation division, which
works concurrently with machine design and machine building divisions, has
implemented multiple automation projects intended to increase productivity and
control labour costs.
Company can manufacture and supply
complex, high-quality precision components according to customers' specifications,
which makes the company its customers' preferred supplier. Further, company is
the single source supplier for certain components to select OEM companies in
India and globally.
Company possesses strong design and
engineering capabilities from product conceptualization to execution.These
capabilities enable it to roll out new products in a timely manner and develop
higher strength components required for high-end performance.
Weaknesses
Company depends on its major OEM customers for a significant
portion of revenues. Its top five customers accounted for 59.21%, 59.46% and
60.01% of total revenue for Fiscals 2021, 2020 and 2019, respectively. The loss
of any key customers may materially affect business and results of operations.
Company's business is very capital intensive, requiring it to
maintain a large, fixed cost base. Profitability of the company is dependent,
in part, on the ability to spread fixed costs over higher sales volume.
However, it may not be able to spread such fixed costs effectively as customers
generally negotiate for larger discounts in price as the volume of orders
increases.
Company's future growth depends on its ability to continue to
develop and commercialize innovative, viable and sustainable new automotive
systems. However development of technologically advanced products involves a
lengthy and expensive process with uncertain timelines and outcomes.
Changes in consumers' preferences, regulatory or industry
requirements, or competitive technologies may render certain of its products
obsolete or less attractive. For instance, company's key products, such as
connecting rods (40% of FY21 sales)and crankshafts (17% of FY21 sales) from
which it derives a substantial (57%)portion of total revenue are not used in
battery electric vehicles.
Company may be subject to liability claims by third parties if
the use of any of its products results in personal injury or property damage. Although
company has product liability insurance, it may not be covered for all
situations that may arise if there are any defects in products. In Fiscals 2021,
2020 and 2019, warranty cost was nil, Rs 2.11 crore and Rs 0.25 crore,
respectively.
Company is dependent on third party suppliers for the supply
of raw materials and assembled components. Company does not have long-term
supply contracts for the supply of raw materials, a loss of suppliers or
interruptions in the delivery of raw materials or volatility in the prices of
raw materials may have a material adverse effect on its business.
A substantial portion of company's assets are hypothecated or
mortgaged in favour of lenders as security for some of its fund-based and
non-fund-based borrowings, lenders may enforce the security in the event of
failure to service debt obligations. As of April 30, 2021, company had total
secured fund and non-fund-based borrowings of Rs 623.13 crore.
Valuation
For FY 2021, consolidated
sales were up by 6.32% to Rs 1549.27 crore compared to FY 2020. OPM increased
by 214 bps to 17.56% which led to 21.11% increase in operating profit to Rs
272.12 crore. Other income increased 44.61% to Rs 23.09 crore, while interest
cost fell 18.41% to Rs 47.39 crore and depreciation increased 8.28% to Rs
101.68 crore. PBT increased 64.81% to Rs 146.15 crore.Tax expenses for FY2021 was
of Rs 36.29 crore compared to tax expense of Rs 8.77 crore in FY2020.
Minority interest for FY2021 was Rs 1.87 crore compared to negative 0.41 crore
in FY2020, Net profit rose 34.46% to Rs 107.986 crore.
The EPS(excluding extraordinary
items and relevant tax) on post-issue equity works out to Rs 21 for FY2021. On
the upper price band of Rs 744, P/E works out to 35.42 for FY2021.
In terms of P/E
ratio, among the other listed peers, Endurance Technologies trades at P/E of
42.28, Minda Industries at P/E of 98.05, Craftsman Automationat P/E of 42.91,LG
Balakrishnan & Brothers at P/E of 10.60, Mahindra CIE Automotive at P/E of
83.67. FY2021 annualized EPS is used in the calculations, with the share price
being used as of 9 September 2021.
Sansera Engineering:
Issue highlights
|
For Offer for Sale Offer size (in Rs Crore)
|
|
- On lower price band
|
1265.73
|
- On upper price band
|
1282.98
|
Offer size (in no. of shares)
|
17,244,328
|
Price band (Rs)
|
734-744
|
Minimum Bid Lot (in no. of shares )
|
20
|
Post issue capital (Rs
crore)
|
|
- On lower price band
|
10.2755
|
- On upper price band
|
10.2755
|
Post-issue promoter & Group shareholding (%)
|
34.96
|
Issue open date
|
14/9/2021
|
Issue closed date
|
16/9/2021
|
Listing
|
BSE, NSE
|
Rating
|
43/100
|
Sansera Engineering: Consolidated
Financials
|
|
1903
(12)
|
2003
(12)
|
2103
(12)
|
Sales
|
1,624.43
|
1,457.17
|
1,549.27
|
OPM (%)
|
17.80%
|
15.42%
|
17.56%
|
OP
|
289.10
|
224.70
|
272.12
|
Other inc.
|
16.38
|
15.97
|
23.09
|
PBIDT
|
305.48
|
240.67
|
295.21
|
Interest
|
51.28
|
58.09
|
47.39
|
PBDT
|
254.20
|
182.58
|
247.82
|
Dep.
|
75.75
|
93.90
|
101.68
|
PBT
|
178.44
|
88.68
|
146.15
|
Share of Profit/(Loss) from
Associates/JV
|
-
|
-
|
-
|
PBT before EO
|
178.44
|
88.68
|
146.15
|
Exceptional items
|
13.49
|
-
|
-
|
PBT after EO
|
164.95
|
88.68
|
146.15
|
Taxation
|
66.89
|
8.77
|
36.29
|
PAT
|
98.06
|
79.91
|
109.86
|
Minority Interest
|
1.85
|
(0.41)
|
1.87
|
Net Profit
|
96.21
|
80.31
|
107.99
|
EPS (Rs)*
|
20.3
|
15.6
|
21.0
|
* EPS is annualized on post issue
equity capital of Rs 10.2755 crore of face value of Rs 2 each
|
# EPS is not annualised due to
seasonality of business
|
|
|
EO: Extraordinary items. EPS is
calculated after excluding EO and relevant tax
|
|
Figures in Rs crore
|
|
|
|
Source: Capitaline Corporate
Database
|
|