Harsha Engineers International is expected to list on the bourses with healthy premium on September 26, following strong subscription figures in the maiden public offer of the precision bearing cages maker, experts said.
According to them, the listing premium could be in the range of 40-50 percent. This translates into a price of Rs 460-500 against issue price of Rs 330 per share, although the said premium corrected from more than 60 percent earlier due to significant volatility in the secondary markets in last few days.
ALSO READ: Despite correction and uncertainty, Harsha Engineers still boasts a premium in the grey market
The market fell more than 4 percent from its recent high, due to global weakness amid rising recession fears in the US after aggressive policy tightening.
The current expected premium is largely backed by the IPO subscription figures, strong financials and long standing relationship with clients, robust growth prospects and healthy market share in the organised precision bearing cages segment.
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"We are expecting Harsha Engineers to list at 40-45 percent premium to issue price," said Astha Jain, Senior Research Analyst at Hem Securities.
Prashanth Tapse, Senior VP Research at Mehta Equities, also said despite uncertainty in the equity markets, Harsha Engineers is signaling a strong debut with significant premium on its issue price of Rs 330 per share.
Considering excellent response from all investor categories, "we assume listing would be around Rs 480-500 levels, which translates to more than 45-51 percent premium over the upper end of the IPO," Tapse said.
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Currently, Harsha Engineers traded with 42-48 percent premium in the grey market which is an unofficial platform for trading in IPO shares, analysts said.
High premium listing is justified on the back of virtual monopolistic business model in its product segment, which generated a stronger than expected investors demand with QIB portion subscribed over 178 times, said Tapse. On valuation per se, the ask price is fairly valued when compared to its industry peers, he added.
The Rs 755-crore public issue was bought 74.7 times by participants, with the portion set aside for non-institutional investors and retail investors being subscribed 71.32 times and 17.63 times, respectively.
Mehta Equities is very optimistic on Harsha Engineers with its dominant position and well placed to tap the growth in specialized precision components and bearing cage demand across all the industries, he said.
Harsha Engineers International is the largest manufacturer of precision bearing cages (critical component within bearings) in terms of revenue, and holds a 60 percent market share in the organised sector. It is also amongst the leading manufacturers of precision bearing cages in the world with a 6.5 percent market share.
The company reported a 22 percent CAGR growth in revenue at Rs 1,322 crore during FY20-FY22, while profit grew by 105 percent CAGR to Rs 92 crore in the same period.
The company has an average EBITDA margin of 12.1 percent and return on equity of 11.4 percent during FY20-22 and can be expected to improve due to product expansion, debottlenecking, increasing capacity utilization (current-63 percent) and reduction in commodity prices in the future, Geojit Securities in its report said.
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