The Rs 1,250 crore-IPO of Carraro India opens for bidding on Friday, December 20 as the company offers its shares in the range of Rs 668-704 apiece. Investors can apply for a minimum of 21 equity shares and its multiples thereafter until Tuesday, December 24, when the issue shall conclude for bidding.
Carraro India is engaged in manufacturing components ranging from the smallest gear to complete tractor manufacturing. It designs, manufactures, and sells transmission systems primarily for agricultural and construction equipment. The IPO of Carraro India is entirely an offer-for-sale (OFS) of up to 1,77,55,680 shares by the Carraro International BE, the promoter of the company.
Brokerage firms are mostly positive on the issue and suggested to subscribe to it for a long-term citing its However, seasonality of business, complete OFS, dependence on select clients and royalty to parents are the key concerns.
Cararro India is a leading Tier-1 supplier of axles, transmission systems and gears for agricultural tractors and construction vehicles in India. The company has showcased notable financial performance over the years with Revenue/EBITDA/PAT growing at a CAGR of 9.3 per cent/48.1 per cent/67.0 per cent respectively over the FY22-FY24 period, said SBI Securities.
"The domestic agriculture tractor sales volume and harvesting equipment industry is expected to grow at a CAGR of 8.2 per cent/7.2 per cent between FY24-FY29E, which shall augur well for the company’s growth. We recommend investors to subscribe to the issue at cutoff price for long term," it added.
Incorporated in 1997, Carraro India owns and operates two manufacturing plants in Pune, Maharashtra. The driveline manufacturing plant occupies a plot area of approximately 84,000 square meters, while the gear manufacturing plant covers an area of approximately 78,000 square meters.
Carraro India is one of the leading manufacturers of axles and transmission systems for agricultural tractors and construction vehicle industry. It is caters to leading industrial and automotive OEMs for gear shafts. The company has grown on the back of new customer additions, improved product mix (shift towards higher HP tractors) and market share gains, said Indsec Research.
"The company also exports components to its parent Carraro SPA, Italy (33 per cent of sales). We believe the Indian tractor industry is poised to grow at 7 per cent CAGR over FY24-27E and it should gain ahead of the industry backed by new product applications and market share gain. We thus assign a 'subscribe' rating to the IPO," Indsec added.
Carraro India mopped up Rs 375 crore from 22 domestic and global investors via anchor book as it allocated 53.26 lakh shares at Rs 704 apiece including Societe Generale, Amundi Funds, Nuvama, Copthall Mauritius, and Apah Capital Master Fund along with various domestic mutual funds and insurance company invested in the Carraro India IPO.
Carraro India is one of the leading tier 1 suppliers of transmissions systems and a key supplier of axles in the agricultural tractor and construction vehicle industries in India. It facilitates innovation of future-ready products along with longstanding relationships with marquee local and international supplier base, said Anand Rathi Research.
"At the upper price band company is valuing at P/E of 45.83 times, with an EV/EBITDA of 31.6 times and market cap of Rs 4,002.3 crore post issue of equity shares and return on net worth of 16.92 per cent. We believe that the IPO is fairly priced and recommend a 'subscribe for long term' rating to the IPO," it said.
The driveline plant has technologies including casting, machining, assembly, prototyping, testing, and painting. The gears plant features machining and heat treatment technologies such as carburizing, induction, hardening, and nitriding. It has established a network of 220 suppliers across eight states in India, along with 58 suppliers internationally.
Carraro India reported a net profit of Rs 49.73 crore with a revenue of Rs 922.74 crore for the six months ended on September 30, 2024. The company has reserved 50 per cent of the net for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the allocations. Retail investors have 35 per cent reservation in the issue.
This offering is purely an OFS, meaning the proceeds will not be reinvested into the company's growth initiatives or operational development. This structure should be carefully considered by potential investors, said Canara Bank Securities. "We recommend to 'subscribe' for long term this issue for investors willing to take on higher risks," it said.
Axis Bank, BNP Paribas and Nuvama Wealth Management are the book running lead managers of the Carraro India IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with December 30 as the tentative date of listing.