Started in 1986, Harsha Engineers Limited is a Ahmedabad Gujarat based largest manufacturer of precision bearing cages in organized sector in India in terms of capacity and operations and amongst the leading manufacturers of precision bearing cages in the world with a market share of approximately 5% to 6% in the organized segment of the global brass, steel and polyamide bearing cages market in terms of revenue. The company holds more than 50% of the market share in the Indian bearing cages market in the organized segment for brass, steel and polyamide cages. (as per Bearing Cages Market – Global Insights, Growth, Size, Comparative Analysis, Trends and Forecasts, 2018-2026) They manufacture bearing cages in brass, steel and polyamide materials with sizes of upto 2,000 mm in diameter for automotive and industrial applications, they also manufacture complex and specialised precision stamped components for automotive and industrial customers. Harsha Engineering is a technology driven company with a strong focus on research and development. Company manufactures bearing cages, semi-finished brass castings and specialty stamping components. They have been able to manufacture more than 5,000 products in the automotive and industrial segments, allowing them to meet changing customer requirements. In addition, over the past five years the product development and innovation centre has developed more than 850 products in different bearing divisions. Company's principal production facilities are at Changodar and Moraiya, near Ahmedabad in Gujarat in India, they also have production facilities in Changshu and Suzhou in China and Ghimbav Brasov in Romania. The combined bearing cages capacity of all our manufacturing units is 1,016.27 million pieces per annum and for semi-finished brass castings is 35,376 million tonnes per annum. Currently company utilises around 70% of its total capacity. To help them meet 'just in time' requirements of the customers they have entered into arrangements to stock inventory in warehouses spread across more than 15 locations across the world including in, Europe, US, China and South America. As on June 30, 2018, Company has a total of 1,775 employees, of whom approximately, 1,686 employees are skilled and technically qualified employees. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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