Happy Forgings IPO Review: The forging industry, plays a pivotal role in the production of crucial components for various applications. From automotive to aerospace, oil and gas to power generation, the demand for high-quality forged products is very important. One such company in the industry that is coming out with its Initial Public Offering is Happy Forgings Limited.
The IPO will open for subscription on December 19, 2023 and close on December 21, 2023. In this article, we will look at the Happy Forgings IPO Review and analyse its strengths, weaknesses, financials and GMP. Keep reading to find out!
Table of Contents
Happy Forgings IPO Review
About The Company
Incorporated in 1979, Happy Forgings is engaged in the designing and manufacturing of heavy forgings and high-precision machined components.
Through its vertically integrated operations, it is engaged in engineering, process design, testing, manufacturing, and supply of a variety of components that are both margin-accretive and value-additive.
The company primarily caters to domestic and global original equipment manufacturers producing commercial vehicles in the automotive sector. In the non-automotive sector, it caters to manufacturers of farm equipment, off-highway vehicles and manufacturers of industrial equipment and machinery for oil and gas, power generation, railways and wind turbine industries.
The following image will show the heavy forged and machined products manufactured by the company:
The company owns and operates three manufacturing facilities located in Kanganwal in Ludhiana, and Dugri in Ludhiana, Punjab. As of FY23, its aggregate installed capacity for forging and machining stood at 107,000.00 MT and 46,100.00 MT.
About The Industry
According to the Ricardo Report, the global markets for forging and machining are projected to be worth approximately $71.9 billion and $52.5 billion respectively in 2023. These markets are expected to grow at a CAGR of 5.1% and 5.2% respectively, reaching a value of $97.0 billion and USD 71.2 billion by 2029.
The forging and machining markets in India are expected to see significant growth in the coming years. The current estimated value of these markets is $7.3 billion and $5.4 billion, respectively, for Fiscal 2024. Furthermore, it is projected that these markets will grow at a CAGR of 7.1% and 8.4% and reach $10.2 billion and $8.0 billion, respectively, by Fiscal 2029.
Happy Forgings IPO – Financial Highlights
If we look at the financials of Happy Forgings we notice that the company’s operating revenues have grown from Rs. 584.95 crores in March 2021 to Rs.1196.53 crores in March 2023.
Their profits have grown from Rs.86.44 crores in March 2021 to Rs.208.70 crores in March 2023. The net profit FY23 gives the company a total margin of 17.44% on its revenue.
As the FY24, the total revenue and net profit for the first six months were recorded at Rs. 672.9 crores and Rs.119.29 crores.
In terms of return ratios, it has a ROE of 21.12% and a RoCE of 24.23% as of FY23. These ratios indicate a good return to shareholders’ capital and an efficient use of company resources.
During FY23, the Debt/Total Net Worth of the company was reported at 0.22. This indicates that the company majorly uses its own funds to run its business.
Key Players in the Market
The following image will show you the comparison of Happy Forgings with its listed peers in the market:
Strengths of the Company
- The company is the fourth largest engineering-led manufacturer of complex and safety-critical, heavy forged and high-precision machined components in India. Furthermore, with the second-largest production capacity for commercial vehicles and high horse-power industrial crankshafts, the company has emerged as a leading player in the domestic crankshaft manufacturing industry.
- The company has integrated its manufacturing operations along with in-house product and process design capabilities. This has resulted in a diverse product portfolio for the company which has allowed it to to serve a wide range of industries and customers, which has strengthened our ability to attract new customers.
- The company has a well-diversified business by customer base and industry. The company serves commercial vehicle OEMs in the automotive sector and provides precision components to OEMs in various industries such as farm equipment, off-highway vehicles, and industrial machinery and equipment.
- The company has established long-standing relationships with several Indian customers over the past 40 years. As of FY23, the company has served 66 customers and as of Q2FY24, the company has served a total of 59 customers.
- The company believe that its significant manufacturing capacities act as an entry barrier for other manufacturers and OEMs that do not currently have such similar in-house engineering capabilities and production facilities.
Weaknesses of the Company
- The company’s business is dependent on its top 10 customers. Loss of any of these customers can have a significant impact on the business
- The customers do not enter into a formal contract with the company while placing the orders. If the customers source their requirements from others, it can have an adverse effect on the business
- The company is dependent on a few suppliers for the requirement of raw materials. Any disruption from the supply of these materials can have an adverse effect on the business
- The company requires huge capital expenditure and working capital to run its operations. The inability to acquire such capital can have an adverse effect on the business
- The company’s profitability is dependent on the availability and cost of steel, which is their primary raw material. Any disruption to the timely and adequate supply of steel, or volatility in the prices of Steel may adversely impact their business
Happy Forgings IPO Review – GMP
The shares of Happy Forgings Limited traded at a premium of 54.12% in the grey market on December 15th, 2023. The shares tarded at Rs 1310. This gives it a premium of Rs 460 per share over the cap price of Rs 850.
Key IPO Information
| Particulars | Details |
|---|---|
| IPO Size | ₹1008.59 Cr |
| Fresh Issue | ₹400.00 Cr |
| Offer for Sale (OFS) | ₹608.59 Cr |
| Opening date | December 19, 2023 |
| Closing date | December 21, 2023 |
| Face Value | ₹2 per share |
| Price Band | ₹808 to ₹850 per share |
| Lot Size | 17 Shares |
| Minimum Lot Size | 1 |
| Maximum Lot Size | 13 (221 shares) |
| Listing Date | December 27, 2023 |
Promoters: Paritosh Kumar, Ashish Garg, Megha Garg, Ayush Capital & Financial Services Private Limited, Garg Family Trust, Paritosh Kumar Garg (HUF) and Ashish Garg & Sons (HUF)
Book Running Lead Manager: Axis Capital Limited, Equirus Capital Private Limited, JM Financial Limited and Motilal Oswal Investment Advisors Limited
Registrar to the Offer: Link Intime India Private Limited
The Objective of the Issue
The proceeds from the IPO will be utilised for the following purposes:
- For purchasing equipment, plant and machinery
- Complete or partial prepayment of certain outstanding borrowings availed by the company
- General corporate purposes
In Closing
In this article, we looked at the details of Happy Forgings IPO Review. We conclude that the company’s strong financials coupled with its dominant position in the market and tough barrier to entry for new entrants, the company has a good potential to grow in the future.
What do you think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.
Written By Aaron Vas
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