Divgi TorqTransfer Systems Limited, a Pune-based engineering company that designs and manufactures heavy-duty transmissions and drivetrain systems, recently announced its initial public offering (IPO) on the National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE). The company aims to raise Rs. 292 crores ($39.8 million) through the IPO, which is set to open for subscription on March 1, 2022.
In this article, we’ll provide a complete guide to the Divgi TorqTransfer Systems Limited IPO, including its business profile, financial performance, and what investors can expect from the IPO.
Business Profile
Divgi TorqTransfer Systems Limited (DTSL) was founded in 2002 and is engaged in the business of manufacturing and selling transmissions and drivetrain systems for off-highway vehicles, including construction and mining equipment, material handling equipment, and defense vehicles.
DTSL designs and manufactures a range of transmissions and drivetrain systems, including axles, drop boxes, power take-off units, gearboxes, and transfer cases. The company serves a range of domestic and international customers, including Tata Motors, Ashok Leyland, BEML, John Deere, Caterpillar, and Komatsu.
DTSL operates out of three manufacturing facilities in Pune, Maharashtra, with a combined production capacity of 25,000 units per annum. The company also has a research and development center and a testing facility.
Financial Performance
DTSL has demonstrated consistent growth over the past few years, with its revenue increasing at a compound annual growth rate (CAGR) of 12.8% from FY-2019 to FY-2021. The company’s revenue for FY2021 was Rs. 353.6 crores ($48.2 million), up from Rs. 317.2 crores ($43.2 million) in FY2020.
DTSL has also maintained a healthy profitability margin, with a profit after-tax (PAT) margin of 10.7% in FY2021, up from 9.4% in FY2020. The company’s PAT for FY2021 was Rs. 37.8 crores ($5.2 million), up from Rs. 29.9 crores ($4.1 million) in FY2020.
What to expect from the IPO?
DTSL’s IPO will consist of a fresh issue of Rs. 132 crore ($18 million) and an offer for the sale of up to 5,744,000 equity shares by existing shareholders. The offer for sale includes up to 2,000,000 equity shares by promoter Ashok Kumar Divgi and up to 3,744,000 equity shares by private equity firm Lighthouse Funds.
The price band for the IPO has been set at Rs. 560 to Rs. 590 per equity share. The minimum bid size is 25 equity shares, and in multiples of 25 equity shares thereafter.
DTSL intends to use the proceeds from the fresh issue to repay certain borrowings, fund working capital requirements, and meet general corporate purposes.
Conclusion
DTSL’s IPO presents an opportunity for investors to invest in a company that operates in a niche market with strong growth prospects. The company’s consistent revenue growth and healthy profitability margin demonstrate its ability to generate strong returns for investors.
However, investors should also consider the risks associated with investing in DTSL, such as the cyclical nature of the off-highway vehicle industry, dependence on a few large customers, and exposure to currency exchange rate fluctuations.
As always, investors should conduct their due diligence and consult with a financial advisor before making any investment decisions.
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