Uniparts India GMP drops sharply: Should you still subscribe to the IPO?

The Rs 835.6 crore IPO by Uniparts India will open for subscription for investors today. Ahead of its listing, the global manufacturer of engineered systems and solutions allotted 43,44,582 shares to 21 anchor investors, including nine schemes of five mutual funds, aggregating to Rs 250.69 crore.

Anchors included Nomura, Morgan Stanley, BNP Paribas, IMCO, Carmignac, Abakkus, Theleme, HDFC MF, Aditya Birla Sun Life and Invesco, among thers.

Last heard, Uniparts was commanding a grey market premium (GMP) of Rs 71. This was lesser than a GMP of Rs 80 level on November 29 Rs 137-140 odd levels on November 28. This was still a 12 per cent premium over the upper limit of the price band Rs 548-577 apiece.

A handful of brokerages have a subscribe rating on the issue.

At higher price band, the IPO is demanding an EV/sales multiple of 2.2 times, which seems to be in-line to the peer average. Uniparts has better profitability and return ratios compared to the peer average, said Choice Broking.

"Considering the global policy tailwinds like massive infrastructure capex planned by the major economies, improving mechanisation in the agriculture and global biasness towards “China plus” strategy, we feel the company has adequate levers to expand its business at higher rates. Thus, we assign a “SUBSCRIBE” rating for the issue," it said.

Nirmal Bang Securities said Uniparts has demonstrated its scalability and execution with the topline growth at 12 per cent CAGR over FY17-22 and has scaled revenue of Rs 1,227 crore in FY22. The company has reduced debt from Rs 330 cr in FY19 to Rs 83 crore as of June 2022, which has helped Uniparts to improve its bottom line performance, it said.

"A global player of engineered systems and components for the off-highway market in the agriculture, CFM and aftermarket, is anticipated to increase its market share from present 8 per cent in higher than 70 HP segment. We believe Uniparts is being offered at reasonable valuations at 15.6 times FY22 earnings considering peer valuations and future growth opportunities in the 3-PL and PMP industry. We recommend subscribing to the issue," it said.

Religare Securities, Hem Securities and KRChoksey Shares & Securities also have subscribe rating on the issue.

Compared to the listed peers, Uniparts is significantly smaller in size in terms of revenue but has superior ROCE and ROE profiles along with a lower net debt/ Ebitda level, said KRChoksey Shares & Securities.

"Considering the upper limit of the price band and FY22 EPS, Uniparts IPO is valued at a P/E multiple of 15.6 times. This is at the lower end when compared to multiples at which the listed peers are trading. Considering the industry growth opportunities, differentiated offerings of Uniparts, expansion of the addressable market and focus on value addition, we recommend that Uniparts India Limited IPO be rated ‘SUBSCRIBE'," it said.

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