IPO Size: Rs. 619 cr IPO - Entirely offer for sale (OFS)
- 71% by PE TA Associates (Wagner) completely exiting 15% holding
- 29% by promoters, to trim 85% stake to 79%.
Price band: Rs. 443-453 per share
Mcap: Rs. 3,003 cr, implying 20.6% dilution
IPO Date: Wed 1st Dec to Fri 3rd Dec 2021, Listing: Mon 13 Dec 2021
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
World’s 2nd largest polymer-based mill liner maker, used mainly for gold and copper ore beneficiation, with ~60% utilization of 24,560 MTPA installed capacity. Nearly 75% of FY21’s Rs. 800 cr revenue is from repeat business.
- Healthy Revenue Growth: Despite global mill liner market declining, company’s revenue grew at a 13% CAGR between FY19-21, thanks to launch of a trademarked composite mill liner DynaPrime. Orderbook for DynaPrime has increased from 23 target sites, as of 31.3.21 to 28, as of 30.6.21.
- Margin Expansion from 18% in FY19 to 24% in FY21, on an adjusted EBITDA basis, as DynaPrime is a higher margin product. FY21 reported PAT stood at Rs. 136 cr, while normalised PAT (excluding other income) is close to Rs. 100 cr.
- Scores over AIA Engineering: Tega is a net debt-free company, with enterprise value (EV) of Rs. 2,935 cr, implying FY22E EV/EBITDA multiple of ~15x over 18x for AIA. Despite AIA’s 3.9 lakh MTPA capacity, Rs. 2,800 cr annual topline and higher net margin, Tega has better outlook:
- Historic revenue and PAT growth of 13% and 53% CAGR respectively over flat performance for AIA Engineering over past 2 fiscals.
- Stronger Fundamentals: Superior realization of Rs.5.5 lakh/MT over AIA’s Rs. 1.25 lakh, Higher Asset Turnover ratio of 4x against 3.2x, current Order book at 39% of FY21 revenue over 27% for AIA
- Not impacted by import duty on Indian grinding media imposed by Canada and South Africa.
- Wide forex fluctuations: As exports constitute 85% of revenue, company reported Rs. 16 cr forex loss in FY20, and on the other hand, Rs. 28 cr forex gain in FY21, which materially impacts reported profit.
- Entirely OFS, with PE investor exiting completely, at an unexciting IRR of just 10% in after a long investment period of 10.5 years.
- Q1FY22 performance subdued, with EBITDA margin declining to 14% on Rs. 173 cr revenue and reported PAT of only Rs. 12 cr for June quarter.