Gala Precision Engineering IPO opens today: Should you subscribe to it?

The initial public offering (IPO) of Gala Precision Engineering is set to open for bidding on Monday, September 2 and the issue can be subscribed till Wednesday, September 4. The company shall be offering its shares in the range of Rs 503-529 per share, where investors can apply for a minimum of 28 shares and its multiples thereafter.

Incorporated in February 2009, Gala Precision Engineering is a manufacturer of precision components such as disc and strip springs (DSS), coil and spiral springs (CSS), and special fastening solutions (SFS). The Thane-based company supplies these products to original equipment manufacturers (OEMs).  

The Rs 167.93 crore-IPO of Gala Precision includes a fresh share sale of Rs 135.34 crore and an offer-for-sale (OFS) of up to 6,16,000 shares by its promoters and existing shareholders of the company. The net proceeds shall be utilized towards setting up a new facility Sriperumbudur, Tamil Nadu; repayment or prepayment of certain borrowings; and general corporate purposes.  

Gala Precision Engineering raised Rs 50.3 crore from 8 anchor investors including Negen Undiscovered Value Fund, NAV Capital Emerging Star Fund, Cognizant Capital Dynamic Opportunities, India Emerging Giants, Finavenue Growth Fund, Chhatisgarh Investments, Gagandeep Credit Capital and Resonance Opportunities Fund as it allocated 9,50,586 shares at Rs 529 apiece.  

Gala Precision's products are used in sectors such as electrical, off-highway equipment, infrastructure, and general engineering, as well as in mobility segments such as automotive and railway. It has supplied its technical springs and high tensile fasteners to customers in several countries including Germany, Denmark, China, Italy, Brazil, USA, Sweden, and Switzerland.  

Gala Precision Engineering has two manufacturing facilities in Wada District, Palghar, Maharashtra. Additionally, a new manufacturing facility is being set up in Vallam-Vadagal, SIPCOT, Sriperumbudur, Tamil Nadu. It had more than 175 customers in more than 25 countries as of March 30, 2024.  

Gala Precision reported a net profit of Rs 22.33 crore with a revenue of Rs 204.38 crore for the financial year ended on March 31, 2024. The company's net profit came in at Rs 24.21 crore with a revenue of Rs 167.08 crore for the financial year 2022-23. Gala Precision Engineering will command a total market capitalization  of Rs 670.24 crore.  

Gala Precision has reserved 50 per cent of its net offer for the qualified institutional bidders (QIBs), while 15 per cent of the offering is allocated towards the non-institutional investors (NIIs). Remaining 15 per cent shares will be allocated to the retail investors for the issue.  

PL Capital Markets is the sole book running lead manager of the Gala Precision Engineering IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE, with September 9, Monday as the tentative date of listing at the bourses. Here's what brokerage firms said about the IPO of Gala Precision Engineering:  

Choice Broking Rating: Subscribe At higher price band, Gala Precision is demanding a EV/sales multiple of 2.9 times, which is at discount to peer average of 4.7 times. Thus, the issue is attractively priced. GPEL is engaged in the manufacturing of niche precision components, which are critical to the end-users applications, said Choice Broking.  

"We are anticipating continued higher demand for its products from the end-consuming sectors like renewables, industrials and railways. Thus, considering the dominant market position, global Tier-1 client base and attractive demanded valuation, we assign a 'subscribe' rating for the issue," it said.  

Reliance Securities Rating: Subscribe Gala Precision has strengthened its core capabilities in precision engineering for a sustainable growth with innovative new product offerings developing over 200 new products in the last few years and winning various awards and accreditations from its global OEM proving a mark fostering higher growth in the coming years with increased capacities, said Reliance Securities.  

"It has a significant market share with a diverse product range and possesses significant entry barriers for new players, experienced management team supported by large diverse skilled force and track record of consistent financial growth. Hence, we recommend a 'subscribe' to the issue," it said.  

Anand Rathi Research Rating: Subscribe for long-term Gala Precision plan to develop their expertise in the key sectors of renewable energy, industrial, and mobility by continuously reinforcing their core strengths in precision engineering for sustainability. It has expanded their range of fastening solutions for the wind segment, developing high-tensile fasteners as an import substitute for leading global wind turbine manufacturers, said Anand Rathi.  

"This expansion has increased their market share by broadening their product range and adding more OEMs, including those for export. Its P/E ratio is 30.0 times based on its FY24 earnings, a market cap-to-sales ratio of 3.3 times its FY24 earnings. We believe that the issue is fairly priced, therefore we recommend 'subscribe for long term' rating to the IPO," it said.  

Swastika Investmart Rating: Subscribe Gala Precision has consistently demonstrated robust revenue growth. While profitability has experienced minor fluctuations, the overall financial performance remains positive. The IPO's valuation aligns with industry benchmarks, said Swastika Investmart. "Given current market trends and the increasing demand for precision components, GPEL is poised for a successful listing and sustained growth," it said.