Heavy forgings manufacturer Happy Forgings Limited is likely to have a bumper debut on the exchanges on December 27. Data from Investorgain suggest a robust listing gain of around 27 percent on the upper end of the price band of Rs 808-850 apiece.
The hope of a bumper listing comes on the back of strong interest shown by investors in the company's Rs 1,009-crore public issue. The company's public offer was subscribed 82 times on the final day of bidding on December 21. Retail investors bought 15.09 times and high net-worth individuals picked 62.17 times the allotted quota, while qualified institutional buyers (QIBs) picked 220.48 times their reserved portion.
Also read: Happy Forgings IPO: 10 things to know before you buy into Rs 1,009-crore issue
"We expect the stock to list at a premium of around 49 percent over its issue price of Rs 850 per share. The strong listing can be attributed to the company’s consistent performance over the past three years. Furthermore, the company is a leading player in the domestic crankshaft manufacturing industry and has the second-largest production capacity for CV and industrial crankshafts," Dhruv Mudaraddi, research analyst at StoxBox said.
Despite a positive outlook for the stock, Mudaraddi advises investors to book profits on the listing day and subsequently consider investing in the company after evaluating its quarterly performance in the near term.
Domestic brokerage firm Choice Equity suggests that the trailing twelve months' price earnings are at a premium to the average of the rest of the players. Thus we assign a "subscribe with caution" rating to the issue, analysts said in a recent note.
Read more: Happy Forgings IPO subscribed 82 times, QIB portion booked 220 times on final day
Analysts at Reliance Securities, with a subscribe rating on the stock, suggest that Happy will continue to grow better than the industry and will be able to diversify its product basket, with a focus on capital efficiency and building healthy financial metrics.
Happy Forgings plans to utilise the net proceeds from the fresh issue for the acquisition of equipment, plant, and machinery, with a total cost of Rs 171.1 crore. Additionally, a portion of the funds, amounting to Rs 152.76 crore, will be allocated for repaying debts. The remaining funds will be earmarked for general corporate purposes.
The Rs 1,009-crore IPO consists of a fresh issue of Rs 400 crore shares and an offer-for-sale of 0.72 crore shares. The anchor book of the offer opened on December 18 for a day.
On the financial front, Happy Forgings 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 the topline front also remained strong, rising more than 39 percent to Rs 1,197 crore.
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