Divgi TorqTransfer Systems (DTTS) is a Pune based company. The company is one of the leading suppliers of transfer case systems to Indian automotive OEMs and the largest supplier of transfer case systems to Indian passenger car manufacturers. The company has filed for an initial public offering (IPO) and plans to open the offering on March 1, 2023. DTTS aims to raise about Rs. Through IPO he will raise 5 billion rupees. It consists of the issuance of new shares and an offer to sell by existing shareholders.In this article, we will take a closer look at Divgi TorqTransfer Systems IPOanalyze the company’s financial and growth prospects and determine whether investors should apply for an IPO.
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Divgi TorqTransfer Systems IPO – Issue Details
IPO start date | March 1, 23 |
IPO closing date | March 3, 23 |
IPO Listing Date | March 14, 23 |
Kind of problem | Book Build Issue IPO |
face value | 5 rupees per share |
IPO price range | Rs 560 to Rs 590 per share |
lot size | 25 shares |
Minimum order quantity | 25 shares |
list at | BSE and NSE |
total issue size | 412 million rupees |
New publication | rupee 180 million |
OFS | 232 million rupees |
QIB Shares Offered | 75% or more of the offer |
Offer of NII/HNI shares | 15% or less of the offer |
Retail Stock Offered | 10% or less of the offer |
company promoter | Jitendra Bhaskar Divgi, Hirendra Bhaskar Divgi and Divgi Holdings Private Limited are promoters of the company. |
Divgi TorqTransfer Systems Prospectus
Divgi TorqTransfer Systems – Company Business Model and Financial Details
The company is one of the few suppliers in India capable of developing and offering system level transfer cases, torque couplers and DCT solutions.
The company is one of the leading suppliers of transfer case systems to Indian automotive OEMs and the largest supplier of transfer case systems to Indian passenger car manufacturers.
We are also the only player to manufacture and export transfer cases from India to global OEMs and the only manufacturer of torque couplers in India. It also has the capability to develop and provide transmission systems for electric vehicles. Having received a business award, the company is proceeding with the prototyping, design, and development of transmission systems for EVs. As of the date of this Red Herring Prospectus, they have won a contract to supply his EV transmission systems to one of India’s leading providers of EVs. However, supply under this contract has not commenced as of the date of this Red Herring Prospectus.
They manufacture and supply various products under a wide range of categories.
(1) Torque transfer system (including four-wheel drive and all-wheel drive)
(ii) Synchronizer system for manual transmission and DCT
(iii) Components of the above product categories for manual transmissions, DCTs, EV torque transmission systems and synchronizer systems.
they also developed
(i) EV transmission system
(ii) the DCT system and
(iii) rear wheel drive manual transmission;
The company is one of the few companies that act not only as a system-level solution provider, but also as a component kit supplier to global OEMs and Tier I transmission system suppliers.
They have in-house software development capabilities and can help provide system-level solutions that provide software to control vehicle dynamics.
Financial performance of the Divgi TorqTransfer system
Fiscal year end/end (Amt in Crores) | ||||
detail | 2020 | 21st year | 22nd year | September 22nd |
Total assets | 303.7 | 362.9 | 405.4 | 430.2 |
Earnings | 170.7 | 195.0 | 241.9 | 137.6 |
Profit after tax | 28.0 | 38.0 | 46.2 | 25.7 |
Profit % | 16.42% | 19.50% | 19.08% | 18.66% |
What is the purpose of the offer?
The corporate objectives of an IPO include both offerings and initial issuances.
Sale Offer For Rs 232 Crores – Proceeds from the IPO are sold to shareholders and the company gets nothing.
New issue of Rs 180 Crores – These funds will be used for:
- Financing capital expenditure requirements for the purchase of equipment/machinery for our manufacturing facilities.
- General corporate purpose.
Divgi TorqTransfer Systems IPO Valuation Analysis
Its IPO price range is Rs 560 to Rs 590.
P/E ratio of 35x – based on 2022 EPS of Rs 16.76.
P/E ratio of 40x – Rs 14.68 based on weighted EPS over the last 3 years
The P/E ratio is 32x. If the EPS for the six months ended 22nd September is Rs 9.32 and is annualized.
Based on this, the company is seeking an IPO price at a P/E ratio of 32x to 40x. Publicly traded companies like ZF Commercial Vehicles are trading at 124x his P/E (highest) and Endurance Technologies at 44x his (lowest). Therefore, we can assume that the IPO price is attractive.
Top Reasons Investors Should Consider Divgi TorqTransfer Systems IPO
- Strong financial performance with consistent revenue and profit growth.
- Niche markets with high barriers to entry and high demand for their products.
- Diverse customer base with over 54% of revenue from exports.
- An experienced management team focused on R&D and new product development.
- Plans for IPO-funded growth and capacity expansion underway.
- A healthy balance sheet with a low debt-to-equity ratio and a high return on equity.
Divgi TorqTransfer Systems IPO Risk Factors
On the risk side:
- Depends on a few large customers for most of its revenue.
- Exposure to risks such as currency fluctuations, regulatory changes and competition.
- Limited diversification in the transmission systems market.
- Limited visibility into the long-term impact of the COVID-19 pandemic on the company’s operations and financial performance.
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Divgi TorqTransfer Systems IPO Review – Is It Worth Investing?
Divgi TorqTransfer Systems is a leading supplier of transfer case systems to Indian automotive OEMs and the largest supplier of transfer case systems to Indian passenger car manufacturers.
Positive factors include strong financial performance, niche markets with high barriers to entry, diverse customer base and experienced management team. Its IPO price is also quite pricey.
Negative factors include reliance on a small number of large customers, exposure to risks such as currency fluctuations and competition, limited diversification, and limited long-term prospects due to the impact of the COVID-19 pandemic.
Considering all these factors, investors can invest in this IPO with a medium- to long-term perspective.
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