Divgi TorqTransfer IPO: Analysts foresee tepid listing on weak market, fair valuation

Divgi TorqTransfer Systems, an automotive component maker, lists on the bourses on March 14, with analysts expecting a flat debut.

The initial public offer (IPO) of Divgi was subscribed 5.44 times during the March 1-3 period. The company and its shareholders raised Rs 412 from the IPO.

“We expect the company to list at a slight premium or status quo on the listing day,” said Astha Jain, Senior Research Analyst at Hem Securities. “We recommend to partially book profit and hold the remaining allotment for the long term.”

The company is one of the very few suppliers in India having the capability to develop and provide system level transfer case, torque coupler, dual clutch automatic transmissions (DCT) solutions and transmission systems for electric vehicles (EVs) across a wide array of automotive vehicles and geographies, with leadership across select product categories.

Divgi TorqTransfer priced its IPO in a band of Rs 560-590 a share.

Pravesh Gour, Senior Technical Analyst, Swastika Investmart, said Divgi is in a niche segment with high entry barriers. It also has the advantage of an experienced management team.

“As per the latest data, the stock was trading at a premium of Rs 18 in the grey market but it is declining, and the current market condition is also not favourable, so we can anticipate its listing at around Rs 600,” Gour said.

The company’s financial performance has been lauded by analysts but they also said the stock is already fairly priced, which means that in the short term, an upside, if any, will be limited.

Some analysts also cited that the majority of its business of Divgi is dependent on a few customers, and geopolitical risk and competition from global players are some concerns that investors should keep in mind.

Though it enjoys long-term relationships with its marquee domestic and global customers.

“With the SVB banking fiasco in the US souring market mood, we expect a tepid listing for the issue and expect the shares to open marginally higher compared to the issue price,” said Manish Chowdhury, head of research at Stoxbox.

“We advise investors who have got allotment in the IPO to stay put, as the company has multiple levers in place to chart a higher growth trajectory such as strong promoter background, robust business growth outlook, good margin profile and reasonable valuation.”

(Sunil Shankar Matkar contributed to this story.)

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