Tega Industries IPO Review – Is it good or bad for investment?
Tega Industries IPO (Tega Industries Limited IPO) Details
Kolkata based Tega Industries is coming up with an IPO that would open for subscription on 1st December 2021. Tega Industries Limited is a leading manufacturer and distributor of specialized, critical, and recurring consumable products for the global mineral beneficiation, mining, and bulk solids handling industry. The company has strong revenue growth in the last 3 years and 3 months. It has fantastic revenue growth in the last 3 years. Should you invest in Tega Industries IPO? What are the risk factors in this IPO? We would have 360 degree review of fundamentals and technical analysis in this article.
About Tega Industries Limited
Company is established in 1976 and commenced its operations in 1978.
Company is the leading manufacturer and distributor of specialized ‘critical to operate’ and recurring consumable products for the global mineral beneficiation, mining and build solids handling industry. Company is globally the second largest producers of polymer-based mill liners.
It offer comprehensive solutions to marquee global clients in the mineral beneficiation, mining and bulk solids handling industry, through its wide product portfolio of specialized abrasion and wear-resistant rubber, polyurethane, steel and ceramic based lining components. These products are used by its customers across different stages of mining and mineral processing, screening, grinding and material handling, including after-market spends on wear, spare parts, grinding media and power, which are regular operating expenses for our customers. Its engineering capability, which has evolved over decades, has enabled them to consistently offer a quality, complex manufactured products within stipulated timelines, allowing to reduce downtime and maximize operational efficiency for its customers, and forge robust relationships with customers leading to high recurring revenues.
Tega Industries IPO details
|IPO Opening Date||01-Dec-21|
|IPO Closing Date||03-Dec-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 10 per equity share|
|IPO Price band||Rs 443 to Rs 453 per equity share|
|Lot Size||33 Shares|
|Min Order Quantity||33 Shares|
|Listing at||BSE and NSE|
|Issue Size||Total Rs 619.23 Crores
1) OFS – Rs 619.23 Crores
2) Fresh issue – Zero
|Book Running Lead Managers||Axis Capital and JM Financials|
What are Tega Industries strengths?
1) Company is a leading producer of specialized and “critical to operate” products, with high barriers to replacement or substitution.
2) It has insulated from mining capex cycles, as its products cater to after-market spends, providing recurring revenues.
3) Company has high value add and technology intensive products, backed by strong R&D and focus on quality control.
4) Long standing market player with marquee global customer base and strong global manufacturing and sales capabilities.
5) Company has consistent growth, characterized by operational efficiency and high repeat business.
6) It has experienced management team supported by large, diverse and skilled work force.
What are the Objects of the IPO Offer?
Tega Industries IPO Size is Rs 619.23 Crores and entire money is for Offer for Sale (OFS). Under OFS, selling shareholders would sell their shares and company would not get any money from this IPO proceeds.
Who is the promoter of Tega Industries Limited?
Madan Mohan Mohanka, Manju Mohanka, Manish Mohanka, Mehul Mohanka and Nihal Fiscal Services Private Limited are the promoters of the company.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years.
|Financial Year ending / Period ending (Amt in Mns)|
|Particulars||FY19||FY20||FY21||Qtr ending 30-Jun-21|
|Profit After Tax||326.7||655.0||1,364.1||118.8|
Why to invest in Tega Industries IPO?
Here are the positive factors in this company.
1) Company is the leading manufacturer and distributor of specialized, critical and recurring consumable products for mineral beneficiation, mining and bulk solids industry. Globally, it is the second largest producer of polymer based mill liners.
2) It has wide product portfolio comprising of 55 mineral processing and material handling products. This portfolio contains products cater to after market spends providing recurring revenues.
3) Company posted strong revenue growth in the last 3 years and 3 months. Its revenues increased from Rs 643 Crores in FY19 to Rs 856.6 in FY21.
4) Company has shown good improvement in reduction of finance costs. Finance costs are nothing but the interest costs / debt financing costs. Its finance costs reduced from Rs 23.6 Crores in FY2019 to Rs 17.2 Cores in FY2021.
5) Company has strong profit growth in the last 3 years. These margins are improving year on year too. It generated profits of Rs 32.6 Crores (5% of revenue) Vs. Rs 136.4 Crores for FY21 (15.9% of revenue).
Risk Factors of investing in Tega Industries IPO
1) This IPO objective is only Offer for Sale (OFS). Under OFS, the IPO proceeds would go to selling shareholders and company would not get any money. Since this is the sole objective of this IPO, company would not get any fresh proceeds and it would not get benefitted except for listing gains.
2) In the last 3 years, over 85% of its total revenues come from foreign countries. It also has global manufacturing facilities. Such facilities along with sales and operations can expose company to risks of doing business in foreign countries which can impact financial condition and operations of the company.
3) If company fails to expand or effectively manage its sales and distribution network, both in India and foreign countries, it can have adverse effect in its business.
4) Company is dependent on 3rd party logistic and support service providers for the delivery of raw materials and finished products. Any disruption on such services can affect company business
5) Company is dependent on a few key suppliers of certain raw materials and do not have long term contracts with these suppliers. Any significant reduction in supply by such suppliers could adversely affect its business.
6) Company, its Promoters and Directors are involved in certain legal proceedings, and an adverse outcome in any such proceedings may adversely affect its business, financial condition and growth strategy.
7) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
Tega Industries IPO dates for subscription, Allotment and Listing
|Finalization of Allotment||08-Dec-21|
|Initiation of Refunds||09-Dec-21|
|Credit to Demat Account||10-Dec-21|
|IPO Shares Listing Date||13-Dec-21|
Frequently Asked Questions (FAQs)
What are Tega Industries IPO Dates?
The IPO opens on 1st December and closes on 3rd December, 2021.
What is Tega Industries IPO Lot Size?
The IPO lot size is 33 Shares, means investors need to apply for minimum order quantity is 33 Shares.
What is the minimum amount to subscribe for Tega Industries IPO?
Investors need to apply for 33 shares at minimum lower price band of Rs 443 per share. Minimum amount in such case would be 33 x 443 = Rs 14,619.
Similarly minimum amount to be applied on upper price band would be Rs 33 x 453 = Rs 14,949.
What are Tega Industries IPO Valuations?
Tega Industries share price band is Rs 443 to Rs 453 per share. 1) If we take last 3 years weighted average EPS of Rs 14.34 and the upper price band of Rs 453, the P/E ratio works out to 31.5x. 2) If we take FY21 EPS of Rs 20.48 and the upper price band of Rs 453, the P/E ratio works out to 22x. 3) If we take Q1 FY22 EPS of Rs 1.78 and annualize for FY22, the P/E works out to be 63x. 4) Means company is asking IPO price in the P/E range of 22x to 63x. As per RHP there is only one listed peers AIA Engineering trading at P/E 31.7x. This matches to 3 years average P/E of Tega Industries. While comparing with one company P/E might not be accurate, since there is no other info available, one can consider that the IPO price is reasonably priced.
What is Tega Industries Grey Market Premium for its IPO?
GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about the IPO price as it is unorganized market. Tega Industries IPO GMP today (Source: Chittorgarh) is at Rs 260 as of the date of writing the article. However, IPOWatch is quoting at Rs 250 for 27th November, 2021. Chanakya also quotes GMP of Rs 250 for this IPO.
How to apply Tega Industries IPO through Zerodha?
If you have demat account with Zerodha, you can apply this IPO online using UPI as a payment gateway. Zerodha customers can apply in Tega Industries Limited IPO by login into Zerodha Console submitting an IPO application form. Follow below steps to apply this IPO in Zerodha platform: 1) Visit the Zerodha portal and login to Console. 2) Go to Portfolio and click the IPOs link. 3) Visit 'Tega Industries Limited IPO' row and click the 'Bid' button. 4) Enter your UPI ID, Quantity, and Price. 5) Click on ‘Submit’ IPO application form. 6) Visit the UPI App (net banking or BHIM) to approve the mandate.
Should I Buy Tega Industries IPO?
Investors should always invest in fundamentally strong companies along with reasonable IPO price. Tega Industries have strong revenue and margin growth. Its IPO price is also reasonably priced.
Tega Industries IPO Review and Conclusion – Is this good or bad for investment?
You might be wondering, should I buy this IPO or not?
Tega Industries is one of the leading manufacture and distributor of specialized critical to operate and recurring consumable products for the global mineral beneficiation, mining and bulk solids handling industry. It is second largest producer of polymer based mill liner globally. Its wide product portfolio consists of 55 mineral processing and material products handling.
Company strategies is to gain market share and customer wallet across high growth markets, expand its manufacturing capabilities to achieve better economies of scale and work on operational efficiencies and margin expansion.
Company generated strong revenue growth in the last 3 years and 3 months.
Company has strong margins growth in the last 3 years. These margins are improving year on year too. However, Q1 FY22 margins have declined compared to FY21.
While there is only one listed peer to compare, the IPO price seems to be reasonably priced.
Considering all these positive factors, investors can invest in this IPO for medium to long term. Considering that stock markets are volatile these days and taking corrections, one may or may not expect listing gains.
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