Divgi TorqTransfer Systems IPO: All You Need To Know
Proceeds of almost Rs 151 crore will be used to finance capex needed to buy equipment or machinery.
Divgi TorqTransfer Systems Ltd. will launch its initial public offering from March 1 to March 3 as the auto component maker looks to raise funds for capital expenditure.
The company will allocate shares to anchor investors on Feb. 28. The IPO comprises of a fresh issue of Rs 180 crore and an offer for sale of up to 39.34 lakh shares by investors and other selling shareholders at a price band of Rs 560-590 apiece. The OFS portion is Rs 232 crore.
IPO Details
Duration: March 1 to 3
Fresh issue: Rs 180 crore
Offer for sale: 39.34 lakh shares.
Price band: Rs 560-590 per share.
Issue size: Fresh issue of Rs 180 crore.
Face value: Rs 5 apiece.
Lot size: 25 shares and multiple.
Listing on: BSE and NSE.
Lead managers: Inga Ventures Pvt Ltd. and Equirus Capital Pvt Ltd.
Use of Proceeds
Proceeds of almost Rs 151 crore from the sale of new shares will be used to finance capital expenditure needed to purchase equipment or machinery.
Business
The company makes transfer case systems, torque coupler and dual-clutch transmission solutions for leading automakers in India.
It also manufactures torque transfer systems including both four-wheel-drive and all-wheel-drive, synchronizer systems for manual transmissions and DCT, and can also develop transmission systems for electric vehicles.
It counts Mahindra & Mahindra Ltd., Tata Motors Ltd., and global supplier such as BorgWarner among its clients.
The company plans to increase market share in both the Indian and overseas markets by offering comprehensive transmission solutions and components to electric vehicle manufacturers.
It has already been awarded a contract for the supply of EV transmission systems for a leading EV maker in India. However, the supply hasn't started yet.
It is also eyeing the increasing demand for automatics in the utility vehicle segment.
The company's sales in the fiscal year 2021-22 were comprised of 74% from the domestic market, 11.7% from Russia and 8.6% from China.
In terms of customers, 95% of the sales came from top five clients, with 56% of the sales coming from a single customer in the year ending March.
Financials
Peer Comparison
Risk Factors
The business largely depends on top five customers, and the loss of such customers or a significant reduction in purchases by such customers will have a material adverse impact on the company.
The geographical concentration of exports to certain countries and the inability to operate and grow the business in such countries may have a material adverse effect on the company's financial condition, results of operations, cash flows and future business prospects.
The company relies on some third-party suppliers for certain key components and raw materials required for manufacturing systems and components. A disruption in the supply of these key components could impact on-time supplies and input cost, if resourced from other suppliers.
The company's operations involve extending credit for pre-agreed periods of time to customers, and consequently, faces the risk of uncertainty regarding the receipt of these outstanding amounts. In six months ended September, trade receivables were at 52% of revenue from operations.
The development of technologically advanced systems and components is a time-consuming and expensive process with uncertain timelines and outcomes. Dependence on the success of R&D and the failure to develop new or improved products or process improvements will negatively impact its competitive position.
Watch the full interview with Jitendra Divgi and Hirendra Divgi of Divgi TorqTransfer: