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Review By Dilip Davda on November 25, 2022

•    Finally, UIL sees the light of day with its third attempt at an IPO.
•    In the meanwhile, it posted growth in its top and bottom lines.
•    The issue is reasonably priced based on its latest financial performance. 
•    Investors may consider investing with a medium to long-term reward strategy.

PREFACE:
Uniparts India Ltd. was trying to launch its maiden IPO since 2014. It filed its first DRHP in September 2014, for an issue of 13040000 shares including a fresh equity issue of 7000000 and the balance by way of OFS. For this issue, ICICI Securities, Edelweiss Fin., and India Infoline Ltd. were the BRLMs. But it did not come with a public issue and preferred to drop the IPO. After that, it filed a fresh DRHP in December 2018 for a fresh equity issue worth Rs. 100 cr. and an OFS for 13060770 shares with a new set of BRLMs i.e. Axis Capital, Motilal Oswal Invest, and SBI Capital Market, but this issue also was dropped. And then, it again filed a fresh DRHP in April 2022 for an OFS of 15731942 shares with a new set of BRLMs i.e. Axis Capital, DAM Capital, and JM Financial. And now based on RHP, it is finally going for an issue of 14481942 shares by way of OFS, and has thus reduced the issue size. But for all these filings, its registrar continued to be - Link Intime India Pvt. Ltd.  Surprisingly, during these periods, it has posted growth in its top and bottom lines that have turned into a "Blessing in disguise" for it to fetch better valuations. 

ABOUT COMPANY:
Uniparts India Ltd. (UIL) is a global manufacturer of engineered systems and solutions and is one of the leading suppliers of systems and components for the off-highway market in the agriculture and construction, forestry and mining ("CFM") and aftermarket sectors on account of its presence across over 25 countries (Source: CRISIL Report). 

UIL is a concept-to-supply player for precision products for off-highway vehicles ("OHVs") with a presence across the value chain. Its product portfolio includes core product verticals of 3-point linkage systems ("3PL") and precision machined parts ("PMP") as well as adjacent product verticals of power take-off ("PTO"), fabrications, and hydraulic cylinders or components thereof. It has a leading presence in the manufacture of 3PL and PMP products globally on account of serving some of the largest global companies (Source: CRISIL Report). Most of UIL's products are structural and load-bearing parts of the equipment and are subject to strict tolerances, specifications, and process controls. A series of precision engineering process steps converge into the manufacturing of these products. 

UIL has an estimated 16.68% market share of the global 3PL market in Fiscal 2022 in terms of value and an estimated 5.92% market share in the global PMP market in the CFM sector in Fiscal 2022 in terms of value. It also caters to the aftermarket segment, especially for the 3PL product range. The company provides replacements of 3PL parts to organized aftermarket retailers and distributors in North America, Europe, South Africa, and Australia.

UIL offers fully integrated engineering solutions from conceptualization, development, and validation to the implementation and manufacturing of products. The conceptualization stage involves acquiring market intelligence, assessing customer requirements, and formulating a customized strategy for individual customers. The development phase includes product designing, material procurement, and processing. By means of servicing aftermarket segment customers, its products find indirect access to a large set up of retail stores across geographies for aftermarket components. Within the aftermarket category, it is focused on the 'will-fit' parts segment, sold to distributors and retail chain stores.

As of June 30, 2022, UIL has a global footprint and served customers across countries in North and South America, Europe, Asia, and Australia, including India. In India, it has five manufacturing facilities, two at Ludhiana, Punjab, one at Visakhapatnam, Andhra Pradesh, and two at Noida, Uttar Pradesh. It has also set up a distribution facility in Noida, Uttar Pradesh. In the United States, UIL has a manufacturing, warehousing, and distribution facility at Eldridge, Iowa, acquired pursuant to the acquisition in 2005 of Olsen Engineering LLC, now known as Uniparts Olsen Inc. ("UOI"), and a warehousing and distribution facility at Augusta, Georgia. It has also set up a warehousing and distribution facility in Hennef, Germany, which serves as its base for serving key European customers. Each of UIL's facilities is strategically located in proximity to several global OEMs in the OHV industry.

As of June 30, 2022, it had 2,156 employees, of which 686 employees were in the regular staff category and 1,474 employees were in the regular labour category.

ISSUE DETAILS/CAPITAL HISTORY:
To avail listing benefits and provide an exit to some of its existing stakeholders, UIL is coming out with a maiden secondary issue i.e. pure Offer for Sale (OFS) of 14481942 equity shares of Rs. 10 each via book building route. It has announced a price band of Rs. 548 - Rs. 577 and mulls raising Rs. 835.61 cr. at the upper price band. The issue opens for subscription on November 30, 2022, and will close on December 02, 2022. A minimum application is to be made for 25 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 32.09% of the post-issue paid-up capital of the company. UIL has allocated 50% for QIBs, 15% for HNIs and 35% for Retail investors. 

The joint Book Running Lead Managers (BRLMs) to this issue are Axis Capital Ltd., DAM Capital Advisors Ltd., and JM Financial Ltd., while Link Intime India Pvt. Ltd. is the registrar of the issue. 

Having issued initial equity at par, the company issued further equity shares in the price range of Rs. 45.00 to Rs. 294.75 between February 2007 and April 2014. It has also issued bonus shares in the ratio of 2 for 5 in February 2007, and 1 for 1 in April 2014.  The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 6.27, Rs. 9.85, Rs. 9.97, Rs. 88.45, Rs. 105.64, Rs. 105.74, and Rs. 147.36 per share. 

This being a pure OFS, UIL's paid-up capital after this IPO will remain the same at Rs. 45.13 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 2604.22 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, UIL has (on a consolidated basis) posted a turnover/net profit of Rs. 938.84 cr. / Rs. 62.64 cr. (FY20), Rs. 947.69 cr. / Rs. 93.15 cr. (FY21), and Rs. 1231.04 cr. / Rs. 166.89 cr. (FY22). For Q1 of FY23, it earned a net profit of Rs. 50.52 cr. on a turnover of Rs. 347.76 cr. Thus for the last 15 months, it has marked sharp improvements in its top and bottom lines. The management is confident in maintaining the trends. Thus IPO appears reasonably priced. 

For the last three fiscals, UIL has reported an average EPS of Rs. 27.68 and an average RoNW of 19.97%. The issue is priced at a P/BV of 3.65 based on its NAV of Rs. 158.15 as of June 30, 2022. 

If we annualize FY23 earnings and attribute it to post-IPO paid-up equity capital, then the asking price is at a P/E of around 12.89. 

DIVIDEND POLICY:
The company paid a dividend of 33% (FY21) and 92% (FY22). It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer documents, UIL has shown Balkrishna Ind., Bharat Forge, and Ramkrishna Forgings as their listed peers. They are currently trading at a P/E of 27.49, 37.89, and 14.55 (as of November 25, 2022). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORDS:
The three BRLMs associated with the offer have handled 68 public issues in the past three years, out of which 25 issues closed below the offer price on the listing date. 

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