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Everything You Need To Know About the Upcoming Divgi TorqTransfer Systems IPO

03 Aug 2023

Of late, the Indian automobile sector hasn’t witnessed many IPOs. However, the public issue of Divgi TorqTransfer Systems may change the situation. The company has even filed the final Red Herring Prospectus (RHP) with the Securities and Exchange Board of India (SEBI) as well. Continue reading to find out more about this upcoming public issue.  

Company Overview

Getting to know the business of a company before investing is very important. So, let’s first take a look at a brief overview of Divgi TorqTransfer Systems’ business.  

The company was first incorporated in 1964, making it one of the oldest entities in the Indian automobile sector. Divgi TorqTransfer Systems is involved in the business of designing, developing, and manufacturing a wide range of automotive components such as system-level transfer cases, dual-clutch automatic transmissions (DCT), and torque couplers, among others. 

Divgi TorqTransfer Systems is currently India’s only manufacturer of torque couplers, giving it an unassailable advantage. The company is also the only entity to manufacture and export transfer cases to global OEMs from India. 

Some of the key products that the company manufacturers include: 

  • Torque transfer systems 
  • Synchronizer systems for manual transmissions and DCTs
  • Components for torque transfer systems and synchronizer systems
  • EV transmission systems 
  • Rear wheel drive manual transmissions

The key customers of Divgi TorqTransfer Systems include big names in the Indian and global auto industry like Tata Motors, Mahindra & Mahindra, BorgWarner, and Toyota Kirloskar Auto Parts. 

Company Financials 

The financials of a company is another key factor that you need to consider when evaluating an IPO. And so, we’ve come up with a summary of some of the key financial metrics of Divgi TorqTransfer Systems that you need to know before investing. 

(figures are in ₹ crores)

Particulars

As of September 30, 2022 FY22 FY21 FY20
Equity Share Capital 13.7 13.7 6.8 6
Net Worth 356.2 340 295.8 209.5
Total Borrowings 0.0497 0.012 0.025 50.4
Operating Revenue 133.7 233.7 186.5 159
EBITDA 37 65.6 51.8 36.9
Restated Profit / (Loss) 25.6 46.1 38 28
Diluted Earnings Per Share (EPS) 9.32 16.76 13.82 10.18
Return on Net Worth (RoNW) 7.37% 14.52% 15.05% 16.20%
Net Asset Value (NAV) per equity share 129.38 123.5 107.47 86.98

Note: Except for the Diluted EPS and NAV per equity share, all other figures are expressed in ₹ crores. 

Key Strengths of the Company 

Divgi TorqTransfer Systems has outlined the strengths of the company in the Red Herring Prospectus filed with the SEBI. Here’s a quick look at what they are. 

  • Products cater to a wide range of automotive vehicles and geographical locations
  • The company is a leader when it comes to supplying transfer case systems to Indian OEMs 
  • Among the largest supplier of transfer case systems for passenger vehicles in India 
  • The company enjoys strong long-term relationships with many Indian and global vehicle manufacturers 
  • The manufacturing facilities of the company are strategically located
  • The company’s unwavering focus on research and development (R&D) and innovation 

Key Risks for the Company 

Just like the strengths, Divgi TorqTransfer Systems has also outlined several risks that its business faces in the RHP. Here’s what they are. 

  • The company’s top 5 customers account for a significant part of its revenue 
  • Availability and prices of raw materials and other components can be volatile
  • The company’s business is dependent on government policies and regulations
  • High business competition
  • Vulnerable to foreign currency exchange rate fluctuations

Details of the IPO

In addition to filing the final Red Herring Prospectus (RHP), the company has also released several key details regarding the IPO such as the price band and opening and closing dates. Let’s take a quick look at what they are.  

Firstly, the upcoming IPO of Divgi TorqTransfer Systems comprises two parts - a fresh issue of shares and an Offer for Sale (OFS) from the company’s promoters. Through the fresh equity share issue, the company is planning to raise Rs. 180 crores, which it plans to use according to the objectives mentioned in the DRHP. Through the OFS component, on the other hand, the promoters of Divgi TorqTransfer Systems are planning to offload 39,34,243 (39.34 lakhs) equity shares.  

Out of the total IPO issue, around 75% of the offer is reserved for Qualified Institutional Buyers (QIBs), 10% for retail investors, and the remaining 15% for Non-Institutional Buyers (NIBs). 

The public issue of Divgi TorqTransfer Systems has been slated to open for subscription on March 01, 2023. The issue will remain open for a total of 3 days and will come to a close on March 03, 2023. The price band for the IPO has also been announced as Rs. 560 to Rs. 590 per equity share. 

Objects of the Offer

The company plans to use the funds raised through the upcoming IPO 2023 primarily for funding capital expenditure in the form of the construction of a new manufacturing facility and the purchase of machinery and equipment for existing plants. Additionally, it also proposes to use the funds for general corporate purposes as well. 

Conclusion

Now that all of the details of the IPO have come to light, you should be able to take an informed investment decision. Considering the modest pricing of the public issue, the Divgi TorqTransfer Systems IPO is likely to witness a full subscription. 

If this upcoming IPO is something that you might be interested in investing in, then go ahead and open a trading and demat account right away. Motilal Oswal allows you to quickly open a demat account online for free through a seamless and hassle-free process. 

 

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