Happy Forgings IPO to open today: Should you subscribe to the issue?

Happy Forgings' initial public offering (IPO) will open for public bidding on Tuesday, December 19. The forging company is offering its shares in the price band of Rs 808-850 apiece. The lot size has been fixed at 17 equity shares. The IPO would conclude on Thursday, December 21.

Happy Forgings, which was incorporated in July 1979, is an Indian manufacturer specialising in designing and manufacturing heavy forgings and high-precision machined components. Happy Forging  has three manufacturing facilities in Ludhiana, Punjab: two in Kanganwal, one in Dugri,.

Happy Forgings seeks to raise a total of Rs 1,008.59 crore via IPO. This  would include a fresh sale of shares worth Rs 400 crore, in addition to an offer for sale of 71,59,920 shares by its promoter Paritosh Kumar Garg (HUF) and investor India Business Excellence Fund.

The net proceeds from the IPO will be used to purchase equipment, plant and machinery and  prepay outstanding borrowings.

The company manufactures and designs various products, including crankshafts, front axle carriers, steering knuckles, differential housings, transmission parts, pinion shafts, suspension products, and valve bodies. It has a global customer base, serving industries in Brazil, Italy, Japan, Spain, Sweden, Thailand, Turkey, the United Kingdom, and the United States of America.
 

Happy Forgings’ notable clients included AAM India, Ashok Leyland, Bonfiglioli Transmissions, Dana India, IBCC Industries, International Tractors, JCB India, Mahindra & Mahindra, SML ISUZU, and Swaraj Engines.

Ahead of its IPO, Happy Forgings raised Rs 302.60 crore,  as it finalised allocation of 35,59,740 shares to anchor investors at a price of Rs 850 apiece. Marquee names in the anchor book included Morgan Stanley, Ashoka Whiteoak ICAV, Optimix Wholesale Global Emerging Markets Share Trust, Janchor Partners, East Bridge Capital Master Fund.

The company has reserved half of the issue or 50 per cent for the qualified institutional bidders (QIBs), while the quota for retail investors in the net offer has been reserved at 35 per cent. The Remaining 15 per cent of the IPO shares will be allocated to non-institutional investors.

JM Financial, Axis Capital, Equirus Capital, and Motilal Oswal Investment Advisors are the book running lead managers for the IPO, with Link Intime India Private Ltd serving as the registrar. The listing of Happy Forgings shares is expected on December 27, with trading available on both BSE and NSE. Here's what brokerage firms say about the IPO of Happy Forgings:

Anand Rathi Research
Rating: Subscribe for long-term
Happy Forgings’s diversified product portfolio, coupled with its focus on margin-accretive and value-additive products, has contributed to its transition from a forging-led business to a leading player in the machined components manufacturing industry, said Anand Rathi Research.

It serves a wide range of industries for oil and gas, power generation, railways, and wind turbine sectors. The company is valuing at P/E of 38.4 times with a market cap of Rs 8,007.4 crore post issue of equity shares and return on net worth of 21.12 per cent. On the valuation front, we believe that the company is fairly priced. It was added with a 'subscribe for long term' rating.

Swastika Investmart
Rating: Subscribe
Happy Forging is a well-experienced and fourth-largest manufacturer of complex machine components. The company shares a long-standing relationship with its large customer base. It has a diversified business model and a track record of consistent growth. The financial performance of the company has also been strong, said Swastika Investmart.

"Investors should remain mindful of certain dependencies. Reliance on the top 10 customers, potential pricing pressure from clients, and competition within the industry introduce some risks. Dependence on a limited number of suppliers also merits consideration. Happy Forgings' attractive valuation, coupled with its impressive track record an promising outlook, makes it a worthy investment option for investors seeking exposure to the manufacturing sector

Arihant Capital Markets
Rating: Subscribe
Happy Forgings is the leading player in the crankshaft manufacturing industry and having second largest production capacity for commercial vehicles and high horsepower industrial crankshafts. The in-house manufacturing, automation and process optimisation would improve the margins, said Arihant Capital Markets in IPO notes.

"The company has a long standing relationship with customers and is targeting China & Europe for new opportunities. The strategic acquisitions to expand business, geography, new products and customers would lead to growth going forward. The issue is valued at an EV/Ebitda of 22.9 times based on FY23 Ebitda and PE of 37.9 times of FY23 EPS," it added with a 'subscribe' rating.

StoxBox by BP Equities
Rating: Subscribe
"The company emerges as the one-stop solution to cater to such market demand in the automotive and non-automotive segments. On the financial performance front, the company’s revenue, Ebitda and PAT grew at a CAGR of 43 per cent, 46.6 per cent and 55.4 per cent, respectively during the FY 2021-23 period. We recommend a 'subscribe' rating for the issue," said StoxBox.

InCred Equities
Rating: Subscribe
The crankshaft market in India is likely to grow at a CAGR of 8.3 per cent, in value terms, over FY24F-29F. RoCE improved from 14 per cent in FY21 to 22 per cent in FY23 while RoE improved to 21 per cent. We recommend subscribing to the IPO, given the long-term opportunities in global forgings and machining, expansion of exports, and strong financials, said Incred Equities.

Happy Forgings is the fourth-largest engineering-led manufacturer of complex and safety critical, heavy forged and high-precision machined components in India as of FY23-end, in terms of forgings capacity, it said. "Electric vehicle or EV penetration across heavy commercial vehicle and industrial sectors," highlighted as key risks.
 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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