Uniparts India Limited IPO opens on Nov 30th: Check detailed review

Uniparts India Limited IPO opens for subscription on 30th November. The company is looking to raise up to Rs 835.61 crore through the public issue. Here are the details: 

Uniparts India Limited (UIL) IPO Details

• Uniparts India Limited IPO Date: 30 November - 2 December 2022
• Uniparts India Limited IPO Price band: Rs 548- Rs 577
• Uniparts India Limited IPO Issue Size: Rs 835.61 crore (only Offer for Sale)
• Reservation: QIB 50%, Retail - 35%, NII 15%
• Minimum Investment: Rs 14,425
• Post Issue Implied Market Cap: Rs 2,473 – Rs 2,604 crore
• Bid lot: 25 shares, and in multiples of 25 shares

Uniparts India Limited IPO: Objects of the Issue

The company will not receive any proceeds from the Offer, and all such proceeds will go to the selling shareholders.

Uniparts India Limited IPO: About Uniparts India Limited

• Uniparts India Limited (UIL) is a manufacturer of engineered systems and solutions. 
• UIL is one of the leading suppliers of components and systems for the off-highway markets in construction and agriculture, forestry, and mining.
• Uniparts is a concept-to-supply player for precision products for off-highway vehicles with a presence across the value chain.
• The company's product portfolio includes core product verticals of 3-point linkage systems (3PL), and precision machined parts (PMP). 
• In India, the company has five manufacturing facilities, one at Visakhapatnam, Andhra Pradesh, two at Ludhiana, Punjab, and two at Noida, Uttar Pradesh.
• In FY22, the company’s customer base comprised over 125 customers in over 25 countries globally. 
• Uniparts had an estimated 16.68% market share of the global 3PL market in FY22 in terms of value and an estimated 5.92% market share in the global PMP market in the CFM sector in FY22 in terms of value.

Uniparts India Limited IPO: Products

A brief description of the core products Uniparts manufacture is as below:

• 3PL: The company's core product verticals includes 3-point linkage systems (3PL), and precision machined parts (PMP).
• PMP: PMP is a group of products that are components requiring stringent material and manufacturing specifications and controls. These include among others, precision machined components, such as pins, bushes, and bosses used in articulated joints.

Uniparts India Limited IPO: Industry Outlook

• The world market for 3PL was between $360 million and $370 million in 2021 and is expected to grow at nearly 6% and 8% between 2021 and 2026.
• Although India and China have a share of nearly 62% of the world tractor production, their share in global 3PL demand is only around 36%.
• The global market for PMP for articulated joints was $648 million in 2021, with 80% and above of the demand from four key geographies: China, Japan, Europe, and North America. 

Uniparts India Limited IPO: Listed Peers

Company’s ability to offer end-to-end solutions to their customers instead of individual components and their emphasis on the global business model to meet the customers’ varying requirements, differentiate them from their competition, and effectively function as an entry barrier for suppliers. 

Its listed peers include companies like Balkrishna Industries Ltd, Bharat Forge Ltd, and Ramkrishna Forging Ltd. Below is the comparison with listed peers:

• In terms of total income, Uniparts India is the smallest player. The largest player is Bharat Forge with a total income for FY22 of Rs 10656.98 crore.
• The EBITDA margin of Uniparts is comparable with other listed peers, except for Balkrishna Industries, which has the highest EBITDA margins.
• The net debt-to-equity ratio is the lowest for Uniparts India Limited.
• For Earning Per Share (EPS), UIL is second on the list with an EPS of 37.74 behind Balkrishna Industries EPS of 74.25.
• Return on Net Worth is the highest for Uniparts among all listed peers.

Uniparts India Limited IPO: Financials

• The company reported net revenue of Rs 907.22 crore, Rs 903.14 crore, and Rs 1227.42 crore for FY20, FY21, and FY22, respectively. The revenue has grown at a CAGR of 16.31% in this period.
• The EBITDA for FY20, FY21, and FY22 was Rs 127.81 crore, Rs 163.93 crore, and Rs 271.66 crore, respectively. The EBITDA margins for the same period were 14.09%, 18.15%, and 22.13%.
• The restated profit was Rs 62.64 crore, Rs 93.15 crore, and Rs 166.89 crore for FY20, FY21, and FY22, respectively. The profit has more than doubled in this period.
• The average EPS and RoNW for the last three financial years are 28.3 and 18.16%, respectively.
• The Debt to Equity ratio has come down from 0.52 in FY20 to 0.17 in FY22.
• The ROCE has increased from 13.98% in FY20 to 31% in FY22.

Uniparts India Limited IPO: Unique Selling Propositions

Leading market presence: They are a global manufacturer of engineered systems and solutions and are one of the leading suppliers of systems and components for the off-highway market in the agriculture and CFM, and aftermarket sectors on account of presence across 25 countries.

Engineering-driven, vertically integrated precision solutions provider: Uniparts provide comprehensive solutions and manufactures high-quality, critical products and components for the OHV industry. Most of their products are critical, structural, and load-bearing parts of equipment and are subject to strict tolerances and specifications.

Global business model: They have a global business model which serves as an effective solution for customers seeking to rationalize their global sourcing and supply chain by providing them multiple choices in the form of Local Deliveries, Direct Exports, and Warehouse Sales.

Long-term relationships with key global customers: UIL has developed long-term relationships with customers in the agriculture and CFM sectors. Four of their top five customers have been their customers for over ten years.

Uniparts India Limited IPO: Growth Potential

Leverage integrated precision engineering capabilities: UIL intends to leverage its manufacturing and warehousing infrastructure, global footprint, and value proposition to expand further in newer geographies, and adjacent product verticals, acquire additional customer accounts and increase wallet share among its existing customers.

Focus on higher value addition products: They continually evaluate product and service opportunities enabling movement towards higher value-addition and improving the margin profile of their revenue portfolio.

Target new customer accounts: UIL plans to increase its sales and customer penetration by targeting new customer accounts and expanding its existing customer accounts in principal markets by offering the entire range of products.

Grow inorganically: They plan to continue strategy to explore opportunities for forward integration, including selectively evaluating targets for strategic acquisitions and investments.

Uniparts India Limited IPO: Risks

Limited customers: They depend on a limited number of customers for a significant portion of their revenues. Revenue from the top 10 customers across product segments and geographies was over 70% for the last three fiscals. The loss of a major customer or significant reduction in production and sales of, or demand of their product will impact their business.

Availability of raw material: Their business, financial condition, results of operations, and prospects are significantly impacted by the availability and cost of raw materials, particularly steel, power, and fuel.

Foreign currency exchange rate fluctuations: They are exposed to foreign exchange rate fluctuations in respect of their foreign currency-denominated borrowings (mainly in the US Dollars), currency mismatches between revenues and expenses, and currency translation losses to prepare consolidated financial statements on account of global operations.

Uniparts India IPO: Detailed review

• A healthy rise in revenues: Uniparts India has seen a robust 16% CAGR rise in revenues between FY20- 22.
• Good rise in profits: Dharmaj Crop’s net profit has grown from just Rs 62 crore in FY20 to 166.90 crore in FY22, at a healthy CAGR rate of 63%.  
• Rising margins: Uniparts India’s EBITDA margins have shown an improvement from 14.09% in FY20 to 22.13% in FY22. 
• Global player: Uniparts India is a global manufacturer of engineered systems and solutions. The company is one of the leading suppliers of systems and components for the off-highway market in the agriculture and construction, forestry and mining ("CFM") and aftermarket sectors on account of its presence across over 25 countries, according to CRISIL. 
• Reasonable valuations: At the higher end of the price band,  Dharmaj Crop IPO is priced at a post-issue PE ratio of ~12.90 times FY23 annualised EPS on a fully diluted basis. This is lower than peers Balkrishna Industries (27.49 times),  Ramkrishna Forgings (14.60 times), Bharat Rasayan (24.4 times).
• Uniparts India IPO Review: Given factors such as a solid rise in revenues, healthy rise in profits, a good runway for growth and reasonable valuations, various external analysts have given a ‘positive’ rating on the company’s long-term prospects.

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.