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Review By Dilip Davda on September 29, 2016

Endurance Technologies Ltd (ETL) is the largest two-wheeler and three-wheeler automotive component manufacturer in India in terms of aggregate revenue for FY2015 from our selected product segments. The company also has operations in Europe with highly-automated manufacturing facilities in Italy and Germany. As a Tier one companies ETL directly supplies to OEMs its high standard products. The company is also the number one aluminium die-casting company in India in terms of actual output and installed capacity in FY2016. ETL is a complete solutions provider, providing end-to-end services by engaging its customers from conception to end-user delivery. Company’s development process includes design, development, validation, testing, manufacturing, delivery and aftermarket sale service for a wide range of technology-intensive auto component products leading to better customer satisfaction and diversification of its customer base. ETL is an innovation-driven company with strong focus on research and development that allows it to develop new products suited to customer requirements. For FY2015, FY2016 and Q1 FY2017, ETL’s total revenue contribution from India was 71.5%, 70.1% and 66.8%, respectively, while r total revenue contribution from Europe was 28.5%, 29.9% and 33.2%, respectively. According to management, so far they have not seen any adversity on account of Brexit.

For listing gains and providing exit to private equity investors, the company is coming out with its maiden IPO via offer for sale mode for 24613024 equity shares of Rs. 10 each via book building route with a price band of Rs. 467-472 to mobilize Rs. 1149.43 – 1161.73 crore (based on lower and upper price band). Issue opens for subscription on 05.10.16 and will close on 07.10.16. Minimum application is to be made for 30 shares and in multiples thereon, thereafter. Post allotment shares will be listed on BSE and NSE. BRLMs to the issue are Axis Capital Ltd and Citigroup Global Markets India Pvt Ltd. Link Intime India Pvt Ltd is the registrar to the issue. ETL issued equity capital at par during 1999-2000 and then at a price of Rs. 280 to Rs. 8215.13 per share during 2005-2010. It also issues some share at Rs. 4 face value and offered buy-back for the same in 2011-12 at a price ranging from Rs. 70.42 to Rs. 457.42 per share. ETL has also issued bonus shares in the ratio of 9 for 1 in November 2007 and 7 for 1 in May 2016. As at 31.05.16 its paid up equity capital stood at Rs. 140.66 crore.

On performance front, for last four fiscals the company has (on consolidated basis) posted turnover/net profits of Rs.3850.88 cr. / Rs. 169.63 cr. (FY13), Rs. 4240.38 cr. / Rs. 205.22 cr. (FY14), Rs. 4949.44 cr. / Rs. 253.94 cr. (FY15) and Rs. 5274.55 cr. / Rs. 292.29 cr. (FY16). For the first quarter of current fiscal it has reported net profit of Rs. 80.05 cr. on a turnover of Rs. 1452.94 cr. If we annualize this and attribute to the equity (that remains same at Rs. 140.66 cr. post IPO due to offer for sale) then the asking price is at a P/E of 20 plus against industry composite of 33 plus. Issue price stands at a P/BV of 4 plus. However, the company has no peer with similar model of product verticals. ETL is well established player in automotive components for two, three and four wheeler automobiles. On consolidated basis its revenue and PAT grew at a CAGR of 11.5 and 19.3 per cent respectively for last three fiscals. For the said period, its average RoCE has remained constant around 22 per cent on an average.

ETL’s client list includes Bajaj Auto, Suzuki, Royal Enfield, Yamaha, Piaggio, Hero, Honda, Daimler, Chrysler, Tata Motors etc. Company is having major thrust on its R & D capabilities with continuous innovations. It also has tie up with renowned MNCs for specialized suspension and brakes components. Since 2005 the company follows Total Productivity Management (TPM) and puts economies of scale and cost reduction strategies in place. ETL currently exports to over 20 countries and has 26 distributors in overseas market. In India it has 256 distributors

On BRLM’s front, two lead managers handled 19 public issues in past three years out of which 5 issues closed below the issue price on the listing date.

Conclusion: Company has been reporting consistent growth in top and bottom line. Based on future prospects for automobile sector, investors may consider investment for short to long term.

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