Divgi Toque Transfer Systems
(DTTS) offer a range of products to its
customers such as system level transfer case, torque coupler, DCT solutions
across segments in the automotive industry, including passenger vehicles,
utility vehicles and commercial vehicles. It also has the capability to develop
and provide transmission systems for EVs.
It has an in-house software development capability which helps it in
providing system level solutions offering software that controls the vehicle dynamics.
It is one of leading player supplying transfer case systems to OEMs in India. DTTS manufacture and supply a
variety of products under the broad categories of (i) torque transfer systems
(which includes four wheel-drive (“4WD”) and all-wheel-drive (“AWD”) products);
(ii) synchronizer systems for manual transmissions and Dual Clutch Transmission
(DCT); and (iii) components for the above-mentioned product categories for
torque transfer systems and synchronizer systems in manual transmission, DCT,
and EVs. It has also developed (i)
transmission systems for EVs; (ii) DCT systems; and (iii) rear wheel drive
manual transmissions. Transfer case system is used in
four-wheel drive (4WD) and transfers power from the transmission to the front
and rear axles by means of drive shafts. Torque coupler is used in front wheel
drive (FWD) based all-wheel drive (AWD) vehicles and it senses the torque
requirement & transfers the necessary torque to the rear wheels when wheels
start slipping on the surface. M&M’s XUV 700 uses Divgi TTS made Nextrac
Torque Coupler. Vehicles fitted with Manual Transmission (MT), Automatic Manual
Transmission (AMT)/ intelligent Manual Transmission (iMT) and Dual Clutch
Transmission (DCT) require synchroniser set. Dual clutch transmission (DCT),
also known as twin-clutch transmission transmits the power from the engine to
the wheels of the passenger vehicle using two separate clutches for odd and
even gears, within one housing. OEMs are heavily dependent on imports for DCT.
Company like Divgi TTS is in the process of launching domestically manufactured
DCT systems for the Indian market. The company is planning to localize and commercialize
7 Speed Dual Clutch Automatic Transmission. Divgi TTS will therefore be the
only the manufacturer of DCT systems in India as other leading manufacturers
such as Aisin, BorgWarner, Hyundai Powersys have import based business model. Transmission component kit
consists of parts of the transmission systems such as manual transmission
(aluminium castings, clutch housing, main case, rear case; torque transfer
components such as gears, shafts, clutches; synchronizers; other shift
linkages, elastomers, bearings, oil seals, fastners, speedo sensors, reverse
switch, gear indicators etc.), Dual Clutch Transmission(aluminium castings, torque
transfer components, synchronizers, dual clutch, electrohydraulic control unit,
sensor cluster, ECU/software), Transfer case (aluminium castings, torque
transfer components, planetary gear sets, strokets, output shafts,
Electromagnetic Actuator, ECU/software and others), EV transmission etc. DTTS has three manufacturing and
assembling facilities located across India. Manufacturing facilities of DTTS
are located at Bhosari and Shivare near Pune in Maharashtra and Sirsi, in
Karnataka. It is also embarked on
setting up another manufacturing unit at Shirwal (Maharashtra). As on February 3, 2023, about 80% of the
construction of Shirwal manufacturing unit is completed, and is expected to be
fully completed by Fiscal 2024. DTTS are also one of the first few
suppliers of steel and carbon-based synchronizer systems for the Indian
markets, and are one of the leading manufacturers of steel synchronizers in
India. Currently DTTS has license
agreement with BorgWarner (inked on Oct 4, 2004 and subsequently renewed on
March 1, 2017 for another 7 years) which provides it the exclusive rights to
manufacture transfer cases and automatic locking hubs, and non-exclusive rights
to manufacture manual transmissions and synchronizers for manual transmissions.
It have also entered into an exclusive distribution agreement with a Japanese
automotive supply chain company in relation to sourcing of products and
components made by the company. Its diverse capabilities enable
it to service customers across segments in the automotive industry, including
passenger vehicles, utility vehicles and commercial vehicles. It have strong
and well established relationships with several marquee domestic and global
OEMs in the automobile sector. Its customer base includes leading automotive OEMs
such as Tata Motors, Mahindra & Mahindra, BorgWarner, a Japanese automotive
supply chain company, a Chinese automobile manufacturer, an Indian automotive
manufacturing company, and an Indian supplier to global automotive OEM, amongst
others. For instance, it has been in continued business with BorgWarner, Tata
Motors and Mahindra & Mahindra for over two decades. Issue & Objects of the offer The offer comprised fresh offer
aggregating to Rs 180 crore and offer for sale of 3934243 equity shares
[2250000 equity shares by Oman India Joint Investment Fund; 1441441 equity
shares by NRJN Family Trust; the investor selling shareholders, 15232 equity
shares by Kishore Mangesh Kalbag, 49430 equity shares by Bharat Bhalchandra
Divgi, 104020 equity shares by Ashish Anant Divgi, 33660 equity shares by Arun
Ramdas Idgunji and 40460 equity shares by Sanjay Bhalachandra Divgi, the other
selling shareholders]. Of the net proceeds from fresh
issue the company will be using Rs 150.707 crore towards funding capital
expenditure requirements for the purchase of equipments of its manufacturing
facilities and balance towards general corporate purposes. Strengths DTTS is one of the few companies
who serve both as systems level solution provider as well as component kit
supplier to global OEMs and Tier I transmission systems suppliers for wide
array of automotive vehicles and geographies with leadership across select
product catergories. It has an in-house software development capability which
helps it in providing system level solutions offering software that controls
the vehicle dynamics. DTTS is the only manufacturer of
transfer case systems and torque couplers in India. These two products are
imported by OEMs in India as penetration of 4WD and AWD vehicles in Indian
market is miniscule at 1-2% currently. So
DTTS is the only manufacturer and
exporter of transfer cases (including the dominant chain driven transfer cases
and ESOF transfer cases) to global OEMs from India. Similarly DTTS is planning
to localize and commercialize 7 Speed Dual Clutch Automatic Transmission and
thus DTTS will be the only manufacturer of DCT systems in India. DTTS have entered into a product
development agreement (“PDA”) and a technology transfer agreement (“TTA”) with
a German automotive company for 13 years till 2033 under which DTTS is co-developing critical components and
systems for DCT applications with exclusive rights for India and non-exclusive
rights for markets outside India. In connection to the PDA and TTA, the
production of the products has not yet commenced. With the increasing penetration
for automatics in passenger vehicles and with the emergence of EV, the company
believes that automotive drive trains will shift from just mechanical systems
to electronics control with embedded software to control the operation of these
systems. It aims to capture this growing trend by continuously investing in
R&D to develop and deliver new and innovative systems and components. With
OEMs continuously focusing on weight reduction in PVs and EVs to enhance the
range, augment the vehicle’s acceleration and improve overall efficiency, DTTS
aim to develop solutions and alternatives for improving the torque density and
reducing the weight of DCT systems and
EV transmission units through its R&D efforts. Weakness Contribution of exports to top
line is on decline from about 52% in FY20 to 8.4% in H1FY23. This is partly due
to factors such as end of certain
programs and the war in Ukraine as well as increase in domestic sales due to
launch of new Mahindra Thar. Russia and
China accounted for 15.8% and 16.5% of revenue in FY21 and that declined to
11.7% and 8.6% respectively in FY22 and
to nil in H1FY23. Share of top customer has
increased from 37% in Fy21 to 75.31% in H1FY23 increasing the customer concentration
risk. Any loss of business or underperformance of any model from top customer
will impact the performance of the company. DTTS dependent on some global
suppliers for key components such as bearings, oil seals, carbon friction
lining, ECU, friction discs and shift motor, etc.. The availability and price
of the same may impact the price and performance of the company. DTTS was earlier referred to the
Board for Industrial and Financial Reconstruction and was declared a “Sick
Company” under the provisions of Sick Industrial Companies (Special Provisions)
Act, 1985 in 2008. It attained a positive net worth and was discharged from the
purview of the Sick Industrial Companies (Special Provisions) Act, 1985 by the
Board for Industrial and Financial Reconstruction pursuant to its order dated
February 24, 2010. Caters primarily to automobile
industry the demand of which is cyclical in nature. Valuation Standalone sales for the fiscal
ended March 2022 stood at Rs 233.78 crore. With OPM expand by 30 bps to 28.1%,
the operating profit was up 26% to Rs 65.61 crore. The other income was down 4%
to Rs 8.10 crore. Thus the PBIDT was up 22% to Rs 73.71 crore. The interest cost was down 10% to Rs 0.17
crore and the depreciation was up 50% to Rs 11.39 crore. Thus the PBT was up
18% to Rs 62.15 crore. With taxation stand higher by 10% to Rs 16 crore, the
PAT was up 21% to Rs 46.15 crore. For the half year ended Sep 2022,
the sales were up Rs 133.72 crore and the net profit was Rs 25.66 crore. The annualized EPS for FY23 on fully diluted
equity (at upper end of price band) works out to Rs 16.8. Thus the PE at upper
price band works out to 35.1. In
comparison, Endurance Technologies, Sona BLW Precision Forgings and Kinetic
Engineering quotes at a PE of 36.1 times, 68.9 times and 115.7 times of their
TTM EPS for quarter ended Dec 2022.
Similarly Bosch, ZF Commercial Vehicles and Sundaram Fastners quotes at
a PE of 38.53 times, 73.33 times, 43.43 times of its TTM EPS for quarter ended
Dec 2022.Auto ancillary companies of similar size in revenue to
DTTS such as ZF Steering and RACL
Geartech quotes at a PE of 21.3 times
and 27.97 times respectively of its TTM EPS for quarter ended Dec 2022.
Divgi TorqTransfer Systems: Issue
Highlights
|
Sector
|
Auto Anciliary
|
Fresh Issue (in Rs Crore)
|
180
|
Offer for sale (in equity share
nos.)
|
3934243
|
Price band (Rs.)
|
|
Upper
|
590
|
Lower
|
560
|
Post-issue equity (Rs crore)
|
|
in Upper price band
|
15.29
|
in Lower Price Band
|
15.37
|
Post-issue promoter (including
promoter group) stake (%)
|
60.48
|
Minimum Bid (in nos.)
|
25
|
Issue Open Date
|
01-03-2023
|
Issue Close Date
|
03-03-2023
|
Listing
|
BSE, NSE
|
Rating
|
44 /100
|
|
|
Divgi TorqTransfer Systems: Re-stated Consolidated Financials
|
|
|
2003 (12)
|
2103 (12)
|
2203 (12)
|
2209 (6)
|
|
Sales
|
159.07
|
186.58
|
233.78
|
133.72
|
|
OPM (%)
|
23.2
|
27.8
|
28.1
|
27.7
|
|
OP
|
36.94
|
51.90
|
65.61
|
37.09
|
|
Other income
|
11.68
|
8.45
|
8.10
|
3.83
|
|
PBIDT
|
48.61
|
60.35
|
73.71
|
40.92
|
|
Interest
|
4.46
|
0.18
|
0.17
|
0.14
|
|
PBDT
|
44.15
|
60.17
|
73.54
|
40.78
|
|
Depreciation
|
6.39
|
7.61
|
11.39
|
6.28
|
|
PBT
|
37.76
|
52.56
|
62.15
|
34.50
|
|
EO Exp
|
0.00
|
0.00
|
0.00
|
0.00
|
|
PBT after EO
|
37.76
|
52.56
|
62.15
|
34.50
|
|
Tax
|
9.72
|
14.51
|
16.00
|
8.84
|
|
PAT
|
28.04
|
38.04
|
46.15
|
25.66
|
|
EPS (Rs)*
|
9.2
|
12.4
|
15.1
|
16.8
|
|
* on post IPO equity (on upper
price band) of Rs 15.29 crore. Face
Value: Rs 5
|
|
|
EPS is calculated after excluding
EO and relevant tax
|
|
|
|
|
|
|
Figures in Rs crore
|
|
|
|
|
|
|
Source: Capitaline Corporate
database
|
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