Hyundai effect? Italian auto component maker Carraro Group picks 3 i-bankers, kickstarts India IPO prep

A second person told Moneycontrol that Carraro's IPO was likely to be a combination of a fresh issue of shares and an OFS (offer for sale).

Days after South Korean giant automaker Hyundai Motors filed a detailed red herring prospectus (DHRP) for a record shattering Rs 25,000-crore IPO of its Indian arm, another global MNC from the auto & auto component segment is weighing a listing of its local operations.

Italy's Carraro Group, an agricultural equipment maker and a leader in transmission systems for tractors and off-highway vehicles, has short-listed three investment banks and initiated preliminary steps to launch an IPO and unlock value in its Indian unit, three persons in the know told Moneycontrol. They spoke on the condition of anonymity.

"Work has begun on the proposed IPO of Carraro India. Axis Capital, BNP Paribas and Nuvama Wealth Management have been onboarded as advisors," said one of the persons above.

A second person told Moneycontrol that the IPO was likely to be a combination of a fresh issue of shares and an OFS (offer for sale).

" No final call has been taken on the size as yet but as of now the plan is to raise upwards of Rs 800 crore. This figure may change later depending on market conditions," this person added.

A third person also confirmed the above saying the issue size was likely to be around Rs 1,000 crore but was not finalized.

"India has become an essential part of the group's operations and the parent is keen to ride on the high valuation multiples here and the strong growth prospects," he elaborated.

Email queries along with reminders to the Carraro Group were unanswered at the time of publishing this article.

Axis Capital declined to comment on the development, while BNP Paribas and Nuvama Wealth Management couldn't be reached for an immediate response. This article will be updated as soon as we hear from them.

Carraro's presence in India dates back to 1997, when a joint venture was signed with Escorts Ltd, leading to the development of a project to establish a manufacturing centre in the Ranjangaon (Pune) area. In 1999, the plant officially began the production of axles and transmissions.

On Dec 27, auto parts maker Happy Forgings raised around Rs 1,000 crore and listed at an 18 percent premium.

In the last one year, stocks of auto ancillary companies like Frontier Spring, Varroc, Pricol and Motherson Sumi have risen sharply by 310.81 percent, 100.83 percent, 110.52 percent and 30.32 percent, respectively.

ALSO READ: Tata Group initiates talks for public listing of Tata Autocomp Systems

On May 28, Moneycontrol had reported that South Korea’s LG Electronics has hired advisors to conduct a feasibility study and explore a potential IPO of its unit LG Electronics India Pvt Ltd.

Hindustan Coco Cola Beverages, a bottling company owned by Coco Cola India, is another instance of an MNC reportedly mulling an India IPO.

The Carraro portfolio and stats that matter

The group has its headquarters in Campodarsego (Padua). As of Dec 31, it had 3,859 employees – of which 1,800 are based in Italy. It manufacturing facilities in Italy (4), India, China and Argentina.

The Group’s activities are divided into two business areas: -

Transmission systems (axles and transmissions) and components mainly for agricultural and construction equipment; gears for very diverse sectors, from the automotive industry to material handling, agricultural applications and construction equipment.

b) Specialised tractors (for vineyards and orchards, between 60 and 100 horsepower) for third-party brands and engineering services for the design of innovative tractor ranges.

Consolidated turnover as of December 31, 2023 reached 846.3 million euros, an increase of 15.8 percent compared to 730.8 million euros in the previous year. EBITDA at December 31, 2023 amounted to 81.1 million euros (9.6 percent of turnover), an increase of 43.3 percent compared to 56.6 million euros (7.7 percent of turnover) in 2022.

Investments at December 31, 2023 amounted to 49.5 million euros, a significant rise compared to the 41.9 million euros at 31.12.2022. The financial commitment of the year in Research and Innovation is equal to 30 million euros (3.54 percent of turnover) in line with forecasts (in 2022 31.7 million euros, 4.16 percent of turnover).

According to a press release by the group, the consolidated net financial position as at December 31, 2023 is in debt for 234.451 million euros, (whereas at December 31, 2022 it was in debt for 205.378 million euros), affected by the important industrial investments done.