Here’s what Tega Industries’ grey market premium indicates ahead of IPO

Analysts on Dalal Street hold a bullish view on the initial public offering (IPO) of Tega Industries, which is set to hit the primary market on December 1. The company has fixed a price band of Rs 443-453 per share for the initial share sale. Retail investors can bid for a minimum of 33 shares and in multiples thereafter. Shares of the company were hovering at an 82 per cent premium in the unlisted market in the afternoon trade on November 30.

The company, incorporated in 1976, is a leading manufacturer and distributor of specialised, critical, and recurring consumable products for the global mineral beneficiation, mining, and bulk solids handling industry. Globally, Tega is the second-largest producer of polymer-based mill liners, based on the revenue for FY21.

It offers a wide product portfolio of specialised abrasion and wear-resistant rubber, polyurethane, steel, and ceramic-based lining components used by its customers across different stages of mining and mineral processing, screening, grinding, and material handling.

Domestic brokerages including Reliance Securities and Religare Broking are bullish on the forthcoming IPO.

“We believe that the company is well placed across the value chain of mineral processing as it provides a wide range of products and solutions which are critical at different stages of mineral processing. Further, its leadership position, strong R&D, track record of developing innovative product portfolio and marquee global customers are key positives for the company,” Religare Broking said, adding in the long term, the company intends to gain market share and increase penetration globally in North America, South America, Australia and South Africa.

Tega Industries’ financial performance has been impressive over the last two years despite the Covid-19 pandemic. While revenue recorded 13 per cent CAGR over FY19-FY21, operating profit and net profit recorded a stellar 39 per cent and 104 per cent annualised growth, respectively, during the same period.

“The growth momentum is expected to continue going forward. From a long term perspective, we have a positive view on the company,” Religare Broking said.

On the other hand, Reliance Securities has given a ‘subscribe’ rating to the issue. Commenting on the valuations, Reliance Securities added that the IPO is valued at 22 times FY21 earnings, which looks attractive compared to its close peer AIA Engineering.

“The market size of global crushing, screening, and mineral processing equipment markets, which was at $20 billion in 2020, is estimated to clock 6.3 per cent CAGR over the next 10 years to around $37 billion. This offers sustained growth visibility for Tega Industries (TIL). Additionally, the strong balance sheet, industry’s leading return ratio and strong cash generation ability offer an edge over peers,” Reliance Securities said in a report.

Sharing the figures of the unlisted market, Abhay Doshi, Founder, Unlisted Arena said, “TIL is available at a premium of Rs 375. Based on the pricing and growth, it looks like enough is left on the table and we can anticipate good demand for the issue,” he said. The IPO will close on December 3.

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