Divgi TorqTransfer IPO Day 3: The initial share sale of auto component maker Divgi TorqTransfer Systems to raise up to Rs 412 crore was subscribed 38 per cent on Thursday — the second day of the bidding process. The public offer of Nandan Nilekani family trust-backed Divgi TorqTransfer Systems opened for subscription on Dalal Street on Wednesday. The issue will be available for subscription till March 3.
The basis of allotment is likely to be finalised on March 9, the initiation of refunds on March 10 and the credit of shares on March 13. Shares of the company will be listed on March 14 on the BSE and NSE.
Divgi TorqTransfer IPO: Subscription Status
The initial public offering of automotive component manufacturer Divgi TorqTransfer Systems was subscribed 38 per cent on the second day of offer on Thursday.
The share sale received bids for 14,49,000 shares as against 38,41,800 shares on offer, according to NSE data.
The portion for Retail Individual Investors (RIIs) received 1.56 times subscription, while non institutional investors category got subscribed 22 per cent and Qualified Institutional Buyers (QIBs) received 6 per cent subscription.
Divgi TorqTransfer IPO: Price Band
The auto components maker has fixed a price band of Rs 560-590 per equity share and at the upper end, the public issue is expected to fetch around Rs 412 crore. The shares are expected to get listed on the exchanges on March 14.
Divgi TorqTransfer IPO: Offer Size
As part of the OFS, Oman India Joint Investment Fund will offload 22,50,000 shares, while Nilekani’s family trust NRJN Family will sell 14,41,441 shares.
Nilekani family trust will bag around 360 per cent profit for its investment in the company when it will offload 14.4 lakh shares as part of OFS. According to the prospectus Nilekani’s trust acquired shares on an average cost of Rs 125.28. Considering the upper price band of Rs 590, the trust will take home profit of nearly Rs 67 crore.
Other selling shareholders in the OFS include Bharat Bhalchandra Divgi, Sanjay Bhalchandra Divgi, Ashish Anant Divgi, Arun Ramdas Idgunji and Kishore Mangesh Kalbag.
Divgi TorqTransfer IPO: Lot Size
Investors can bid for a minimum of 25 shares and in multiples of 25 shares thereafter. Retail investors can make a minimum investment of Rs 14,750 for a single lot and a maximum of Rs 1,91,750 for 13 lots, at the higher end of the price band.
Divgi TorqTransfer IPO: About Company
Divgi TorqTransfer develops and provides system-level transfer case, torque coupler and DCT solutions, to automotive original equipment manufacturers through its three manufacturing and assembling facilities in India.
The company claims to be the largest supplier of transfer case systems to passenger vehicle manufacturers, the only player manufacturing and exporting transfer cases to global OEMs from India and the only manufacturer of torque couplers in India, as per CRISIL report.
Divgi TorqTransfer IPO: GMP
According to market experts, the grey market premium, which indicates the premium commanded by the company in the unlisted market, is currently at Rs 65 on March 1, which shows potential listing gains of 11%, if we consider the upper price band.
Should investors subscribe to the issue? Here’s what experts say:
Analysts expect the company to deliver in the long term and investors with a long-term view can bid for the IPO.
“The company’s strong balance sheet and positive operating cash flows enable it to fund its strategic initiatives, pursue opportunities for growth and manage unanticipated cash flow variations,” said Hem Securities, which has a subscribe recommendation with long-term view.
Most brokerages are pleased with the company’s financials till FY22. “The company is virtually debt free as of September 2022. On valuation front, the company is available at 35.20x PE for FY22 which is quite attractive to the industry peers,” said Canara Bank Securities with a subscribe recommendation.
Other brokerages ICICI Direct and Nirmal Bang Securities too have a “subscribe” recommendation to the issue.
Some of the key risks that could derail the company’s journey include its high concentration of revenue from few customers. Divgi is a business to business (B2B) manufacturing company, which gets a large chunk of revenue from top five customers Mahindra & Mahindra, Tata Motors, Toyota Kirloskar Auto Parts, BorgWarner and a Russian automobile manufacturer.
“The overseas sales are primarily dependent on two countries, China and Russia, which exposes the company to concentration risks,” said Canara Bank Securities.
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