Harsha Engineers International Limited
Please refer to important disclosures at the end of this report
1
Harsha Engineers International Ltd (HEIL) is the largest manufacturer of
precision bearing cages, in terms of revenue, in organized sector in India, and
amongst the leading manufacturers of precision bearing cages in the world.
HEIL offers diversified suite of precision engineering products across
geographies and end-user industries. It operates under 2 Business Divisions:
(i) Engineering business, under which it manufactures bearing cages (in brass,
steel, and polyamide materials), complex and specialized precision stamped
components, welded assemblies and brass castings and cages & bronze
bushings; and (ii) solar EPC business, under which it provides complete
comprehensive turnkey solutions to all solar photovoltaic requirements.
Positives: (a) Comprehensive solution provider offering a diversified suite of
precision engineering products across geographies and end-user industries. (b)
Expertise in Tooling, design development and automation (c) Strategically located
domestic and international production facilities and warehouses. (d) Long-standing
relationships with leading clientele.
Investment concerns: (a) High exposure to foreign currency exchange rate
fluctuations (b) HEIL has recently completed a corporate reorganization, due to
which they may face administrative and operational difficulties. (c) High dependence
on limited number of customers. (d) HEIL has certain contingent liabilities and
capital commitments, which, if they materialize, may adversely affect the financial
condition.
Outlook & Valuation: In terms of valuations, the post-issue P/E works out to 32.7x
FY22 EPS (at the upper end of the issue price band). Company’s consolidated PAT
has grown at CAGR of ~105% over FY20-22 on back of margin expansion. HEIL has
diverse product portfolio and strong expertise; we believe that these positives are
yet to be factored in the valuations commanded by the company. Thus, we have a
SUBSCRIBE rating on the issue.
Key Financials
Y/E March (₹ cr)
FY’20
FY'21
FY'22
Net Sales
886
874
1,321
% chg
-1%
51%
Net Profit
22
45
92
% chg
107%
102%
EBITDA (%)
9.7
13.9
12.8
EPS (Rs)
2.4
5.0
10.1
P/E (x)
137.1
66.1
32.7
P/BV (x)
8.1
7.0
5.8
ROE (%)
5.9
10.6
17.6
ROCE (%)
6.4
11.2
14.7
EV/Sales
3.8
3.8
2.5
Source: Company RHP, Angel Research
SUBSCRIBE
Issue Open: September 14, 2022
Issue Close: September 16, 2022
Offer for Sale: ` 300cr
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 74.6%
Public 25.4%
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: ` 91cr
Issue size (amount): ₹ 755cr
Price Band: ₹314- ₹330
Lot Size: 45 shares and in multiple thereafter
Post-issue mkt. cap: * `2,881cr - ** `3,004cr
Promoters holding Pre-Issue: 99.70%
Promoters holding Post-Issue: 0.30%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Fresh issue: `455cr
Issue Details
Face Value: `10
Present Eq. Paid up Capital: ` 77cr
IPO NOTE
Harsha Engineers International Limited
September 13, 2022
Harsha Engineers International Ltd | IPO Note
September 13, 2022
2
Company background
Harsha Engineers International Ltd (HEIL) was incorporated on 11
th
December
2010. It is part of Harsha Group and is the largest manufacturer of precision
bearing cages, in terms of revenue, in organized sector in India, and amongst
the leading manufacturers of precision bearing cages in the world. It has a
market share of ~50-60% in the Indian bearing cages market and a 6.5% market
share in global organized bearing brass, steel, and polyamide cages market.
HEIL operates under 2 Business Divisions:
1) Engineering business, under which it manufactures bearing cages (in
brass, steel, and polyamide materials), complex and specialized
precision stamped components, welded assemblies and brass castings
and cages & bronze bushings; and
2) Solar EPC business, under which it provides complete comprehensive
turnkey solutions to all solar photovoltaic requirements.
HEIL offers diversified suite of precision engineering products across
geographies and end-user industries. They offer a wide range of bearing cages
starting from 20 mm to 2,000 mm in diameter and their bearing cages find its
application in the automotive, railways, aviation & aerospace, construction,
mining, agriculture, electrical and electronics sectors amongst others.
HEIL has 4 strategically located manufacturing facilities for their engineering
business with one of their principal manufacturing facilities at Changodar and
one at Moraiya, near Ahmedabad in Gujarat, and one manufacturing unit each
at Changshu, China, and Ghimbav Brasov in Romania. Company derives
majority of its Revenues from exports.
Harsha Engineers International Ltd | IPO Note
September 13, 2022
3
Issue details
The IPO is made up of Fresh issue of ₹455cr and offer for sale of ₹300cr making
the total Issue size of ₹755cr.
Pre & Post Shareholding
(Pre-Issue)
(Post-Issue)
Particulars
No of shares
%
No of shares
%
Promoter
7,70,17,433
99.7%
6,79,26,524
74.6%
Public
2,30,977
0.30%
2,31,09,765
25.4%
Total
7,72,48,410
100.0%
9,10,36,289
100.0%
Source: Company, Angel Research
Objectives of the Offer
◼ Rs 455cr proceeds from the fresh issue would be utilized as follows:
o Up to ₹270cr utilized for pre-payment or scheduled repayment
of a portion of the existing borrowing availed by the company.
o Up to ₹78cr utilized for funding capital expenditure
requirements towards purchase of machinery.
o ~₹7cr to be used for Infrastructure repairs and renovation of
our existing production facilities including office premises in
India.
o Rest would be utilized for general corporate purposes
Harsha Engineers International Ltd | IPO Note
September 13, 2022
4
Key Management Personnel
Rajendra Shah is the Promoter, Chairman and Whole-time Director of the
company. Currently, he looks after overall management of the company,
particularly all financial matters. He has over 35 years of experience in the precision
engineering business for bearing cages and stamped components.
Harish Rangwala is the Promoter, Managing Director of the company. Currently,
he looks after overall management of the company along with Renewable energy
division. He has over 35 years of experience in the precision engineering business
for bearing cages and stamped components.
Vishal Rangwala is the Promoter, Chief Executive Officer, and Whole-time Director
of the company. He is responsible for the overall strategic directions for the Harsha
group and is currently leading marketing and corporate functions. He has over 13
years of experience in the precision engineering business for bearing cages and
stamped components.
Pilak Shah is the Promoter, Chief Operating Officer, and Whole-time Director of
the company. He is responsible for the overall strategic directions of the Harsha
Group. He has over 13 years of experience in the precision engineering business
for bearing cages and stamped components.
Hetal Ukani is a Whole-time Director of the company. She has been associated
with the company since 2015. She is responsible for Health and Safety of all
employees and others who may be affected by the company’s operations. She also
plays a vital role in managing TPM function of the company.
Harsha Engineers International Ltd | IPO Note
September 13, 2022
5
Financial Summary
Income Statement (Consolidated)
Y/E March (₹ cr)
FY’20
FY’21
FY’22
Net Sales
886
874
1,321
% chg
-1%
51%
Total Expenditure
800
752
1,152
Raw Material
458
415
740
Personnel
149
146
158
Other Expenses
193
191
255
EBITDA
86
122
169
% chg
42%
39%
(% of Net Sales)
9.7
13.9
12.8
Depreciation& Amortisation
35
34
35
EBIT
51
88
134
% chg
73%
52%
(% of Net Sales)
5.7
10.0
10.1
Interest & other Charges
33
30
25
Other Income
14
3
18
(% of PBT)
43.2
4.9
13.8
PBT
32
61
127
% chg
92%
109%
Tax
10
15
35
(% of PBT)
30.6
25.2
27.4
PAT
22
45
92
% chg
107%
102%
(% of Net Sales)
2
5.2
7.0
EPS (Rs)
2.4
5.0
10.1
Source: Company, Angel Research
Harsha Engineers International Ltd | IPO Note
September 13, 2022
6
Balance Sheet (Consolidated)
Y/E March (₹ cr)
FY’20
FY’21
FY’22
Equity Share Capital
50
50
77
Reserves& Surplus
322
377
445
Shareholders’ Funds
372
427
522
Minority Interest
-
-
-
Total Loans
419
357
385
Other Liabilities
9
12
13
Total Liabilities
800
795
920
APPLICATION OF FUNDS
Net Block
264
269
285
Goodwill
70
73
71
Capital Work-in-Progress
3
3
2
Investments
7
9
6
Current Assets
611
608
774
Inventories
232
268
376
Sundry Debtors
239
214
283
Cash
57
45
39
Loans & Advances
7
5
12
Other Assets
76
76
63
Current liabilities
188
184
234
Net Current Assets
423
424
539
Deferred Tax Liabilities (net)
(15)
2
4
Other Assets
18
18
20
Total Assets
800
795
920
Source: Company, Angel Research
Harsha Engineers International Ltd | IPO Note
September 13, 2022
7
Cashflow Statement (Consolidated)
Y/E March (₹ cr)
FY’20
FY’21
FY’22
Profit before tax
32
61
127
Depreciation
35
34
35
Change in Working Capital
30
-2
-121
Interest / Dividend (Net)
30
28
23
Direct taxes paid
(13)
-1
-31
Others
0
2
4
Cash Flow from Operations
113
121
36
(Inc.)/ Dec. in Fixed Assets
(74)
-42
-47
(Inc.)/ Dec. in Investments
5
0
-1
Interest Received
1
21
-6
Cash Flow from Investing
(68)
(22)
(53)
Proceed / (Repayment) of long-term borrowings
5
(62)
28
Dividend Paid (Incl. Tax)
(10)
0
0
Interest / Dividend (Net)
(30)
-28
-23
Cash Flow from Financing
(35)
(90)
5
Inc./(Dec.) in Cash
10
9
(12)
Opening Cash balances
14
24
33
Closing Cash balances
24
33
21
Source: Company, Angel Research
Key Ratios
Y/E March (₹ cr)
FY’20
FY'21
FY'22
Valuation Ratio (x)
P/E (on FDEPS)
137.1
66.1
32.7
P/CEPS
52.6
37.8
23.6
P/BV
8.1
7.0
5.8
EV/Sales
3.8
3.8
2.5
Per Share Data (Rs)
EPS (Basic)
3.1
6.4
12.9
EPS (fully diluted)
2.4
5.0
10.1
Cash EPS
6.3
8.7
14.0
Book Value
40.9
46.9
57.3
Returns (%)
ROE
5.9
10.6
17.6
ROCE
6.4
11.2
14.7
Source: Company, Angel Research;
Harsha Engineers International Ltd | IPO Note
September 13, 2022
8
Research Team Tel: 022 - 40003600 E-mail: [email protected] Website: www.angelone.in
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