Happy Forgings IPO launch on December 19, comprises fresh issue component of Rs 400 crore

Promoters currently hold 88.24 percent shareholding in the company and the rest of shares are held by investor India Business Excellence Fund – III.

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The Punjab-based company that primarily caters to domestic and global original equipment manufacturers in several sectors such as automotive, off-highway vehicles, oil and gas, power generation, railways and wind turbine industries will make use of net fresh issue proceeds for purchase of equipment, plant and machinery at a cost of Rs 171.1 crore and repaying debts amounting to Rs 152.76 crore.

And the remaining amount will be set aside for general corporate purposes.

As of October 2023, its total outstanding borrowings stood at Rs 259.94 crore.

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Happy Forgings has reserved half of its public issue size for qualified institutional buyers. Further, 15 percent offer size has been set aside for high networth individuals, and the remaining 35 percent for retail investors.

The manufacturer of heavy forged and machined products including crankshafts, front axle beams, steering knuckles, differential cases, transmission parts, pinion shafts, suspension products and valve bodies across industries earned nearly 44 percent of business from automotive segment, and the balance 56 percent is contributed by non-automotive sectors.

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Some of its customers include AAM India Manufacturing Corporation, Ashok Leyland, Bonfiglioli Transmissions, International Tractors, JCB India, Mahindra & Mahindra, Meritor Heavy Vehicle Systems Cameri SPA, SML ISUZU, Swaraj Engines, Tata Cummins, Watson & Chalin India, and Yanmar Engine Manufacturing India.

The company has recorded a 46.7 percent on-year growth in net profit at Rs 208.7 crore the year ended March FY23, with EBITDA (earnings before interest, tax, depreciation and amortisation) rising 47.7 percent to Rs 341 crore and margin expanding by 170 bps to 28.5 percent during the same period.

The business at topline front also remained strong, rising more than 39 percent to Rs 1,197 crore.

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But the same performance was not seen in the current financial year, as net profit grew by 2.5 percent on-year to Rs 119.3 crore for the six months period ended September FY24 due to fall in EBITDA margin with increase in input cost and increase in inventory. Employee, finance costs and other expenses also increased significantly.

EBITDA rose by 7.3 percent year-on-year to Rs 195.2 crore, but EBITDA margin dropped 130 bps to 29 percent for the first half of FY24. Revenue during the same period increased by 12.2 percent to Rs 673 crore.

The company in consultation with the NSE is going to finalise the basis of allotment of IPO shares by December 22 and successful investors will get equity shares in their demat accounts by December 26.

The trading in its equity shares on the BSE and NSE will commence with effect from December 27.

JM Financial, Axis Capital, Equirus Capital, and Motilal Oswal Investment Advisors are the merchant bankers to the issue.

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