Happy Forgings IPO Issue Date: Happy Forgings, a company making forged and machined components used in trucks, wants to raise Rs 1008 crore through IPO at a valuation of Rs 8000 crore. There will be new shares worth Rs 400 crore in this IPO. The money received from this will be used to increase production capacity and repay loans. Shares worth Rs 608 crore are being offered by the promoter and a private equity investor. After the IPO, the promoter’s shareholding will reduce from 88 percent to 78 percent.
Happy Forgings IPO General Overview
Happy Forgings IPO Issue Date
| IPO Open Date | Tuesday, December 19, 2023 |
| IPO Close Date | Thursday, December 21, 2023 |
| Basis of Allotment | Friday, December 22, 2023 |
| Initiation of Refunds | Tuesday, December 26, 2023 |
| Credit of Shares to Demat | Tuesday, December 26, 2023 |
| Listing Date | Wednesday, December 27, 2023 |
| Cut-off time for UPI mandate confirmation | 5 PM on December 21, 2023 |
| Period Ended30 Sep 202331 Mar 202331 Mar 202231 Mar 2021Assets1,489.801,326.171,129.87876.38Revenue675.731,202.27866.11590.81Profit After Tax119.30208.70142.2986.45Net Worth1,103.33988.31787.62645.16Reserves and Surplus1,088.25978.66769.72636.21Total Borrowing258.97218.52240.35153.47Amount in ₹ Crore |
Financial history
| Financials | 2Y growth (% pa) | TTM | FY23 | FY22 | FY21 |
|---|---|---|---|---|---|
| Revenue (Rs cr) | 43.0 | 1270 | 1197 | 860 | 585 |
| EBIT (Rs cr) | 52.8 | 293 | 287 | 193 | 123 |
| PAT (Rs cr) | 55.9 | 212 | 209 | 142 | 86 |
| Net worth (Rs cr) | 1503 | 988 | 788 | 645 | |
| Total debt (Rs cr) | 259 | 219 | 240 | 153 | |
| EBIT is earnings before interest and taxes PAT is profit after tax | |||||
Key ratios
| Ratios | 3Y average (%) | TTM | FY23 | FY22 | FY21 |
|---|---|---|---|---|---|
| ROE (%) | 16.8 | 21.1 | 31.2 | 18.9 | 0.4 |
| ROCE (%) | 16.2 | 23.2 | 31.2 | 17.4 | 0.1 |
| EBIT margin (%) | 22.5 | 23.1 | 24 | 22.5 | 21 |
| Debt-to-equity | 0.2 | 0.2 | 0.31 | 0.24 | |
| ROE is return on equity ROCE is return on capital employed | |||||
Happy Forgings IPO Details
| IPO Date | December 19, 2023 to December 21, 2023 |
| Listing Date | |
| Face Value | ₹2 per share |
| Price Band | ₹808 to ₹850 per share |
| Lot Size | 17 Shares |
| Total Issue Size | 11,865,802 shares (aggregating up to ₹1,008.59 Cr) |
| Fresh Issue | 4,705,882 shares (aggregating up to ₹400.00 Cr) |
| Offer for Sale | 7,159,920 shares of ₹2 (aggregating up to ₹608.59 Cr) |
| Issue Type | Book Built Issue IPO |
| Listing At | BSE, NSE |
| Share holding pre issue | 89,499,000 |
| Share holding post issue | 94,204,882 |
Forging earns more than the machined parts segment. The share of machined parts in the total sales of the company is continuously increasing. The company is also procuring raw material at low prices. Due to this, the operating margin of Happy Forgings is higher among the rival companies.
The company has increased the capacity without impacting the return ratio. However, 33 percent of the total value of its fixed assets comes from capex between FY 2022 and FY 2023. There is also good scope for export growth. In the first half of financial year 2024, exports contributed 20 percent to the company’s earnings. This was much less than other companies. The company offers 15-20 percent lower prices to foreign customers than the current landed cost. Considering these aspects, investors can consider this IPO (Happy Forgings IPO).
What is the business model of Happy Forgings?
Headquartered in Ludhiana, Happy Forgings is India’s fourth largest heavy forged and precision machined component maker. The company has the second-largest factory of high-powered industrial crankshafts in India. It manufactures crankshafts ranging from 10 to 210 kg.
Sales to customers in the commercial vehicle segment account for 43 percent of the company’s revenue. This is followed by agricultural equipment manufacturing customers (37%) and off-highway customers (16%). The remaining part of the earnings comes from sales to industries. Happy Forgings’ customers include companies like Ashok Leyland, VE Commercial Vehicles, Dana India, JCB India and Mahindra & Mahindra. It exports its products to nine countries. These include countries like Sweden, Türkiye and Italy. The company has a total forging capacity of 1 lakh 20 thousand tonnes. Apart from this, there is a machining capacity of 47 thousand tonnes. Its three factories are in Punjab.
What is the status of Happy Forgings’ revenue and profits?
Revenue increased by 43 percent to Rs 1,196 crore between FY 2021 and FY 2023. During this period, operating profit increased at a CAGR of 46 percent to Rs 341 crore. This means that the company’s margin was 28.5 percent. Happy Forgings’ operating profit margin has increased by 135 basis points over the last two financial years. Net profit grew at a CAGR of 56 percent to Rs 209 crore between FY 2021 and FY 2023. In the first half of FY 2024, the company’s revenue was Rs 672 crore and net profit was Rs 119 crore.
Is there any risk in Happy Forgings IPO?
Most of the company’s business is related to the commercial vehicle segment. This segment is cyclical in nature. Usually there is an upcycle of 5-6 years followed by a down cycle of 2-3 years. If the down cycle in this segment gets prolonged, Happy Forgings’ earnings will be affected. Apart from this, the company’s top 5 customers contribute 47 percent to its total revenue. Any delay in sourcing orders from these customers could impact the financial condition of Happy Forgings.
Is Happy Forgings’ IPO expensive?
At the upper end of the price band, the company is demanding a valuation of 37 times its last 12 months’ profits. Whereas, if we look at its listed rivals, Bharat Forge is trading at PE of 46.7, Craftsman Automation of 47.2 and Ramakrishna Forgings of 49.
