GNA Axles IPO review (Apply)

GNA Axles Ltd (GNA) is today among the leading manufacturers of rear axle shafts used in on-highway and off-highway vehicular segments in. Since its first supplies in 1995 and first exports in 2002-2003, GNA has grown to production levels of more than 2.26 million components in Fiscal 2016. The company manufactures and supplies a diverse range of rear axle shafts, other shafts and spindles for the on-highway segment, i.e. for light commercial vehicles (“LCVs”), medium commercial vehicles (“MCVs”) and heavy commercial vehicles (“HCVs”) and other transport vehicles such as buses. It also manufactures and supplies a diverse range of rear axle shafts and other shafts for the off-highway segment, i.e. for agricultural tractors and machinery, forestry and construction equipments, electric carts and other specialty vehicles used in mining and defense sectors. The company also manufactures solid and hollow spindles used in the axle assembly for various vehicles and equipments in the on-highway segment which is supplied to export customers. The company claims to be the only well organized robotic manufacturing company providing all Shaft related services under one roof.

To part finance purchase of plant and machinery as well as raise working capital and general corpus fund, the company is coming out with a maiden IPO of 6300000 equity shares of Rs. 10 each via book building route in a price band of Rs. 205-207 to mobilize Rs. 130.41 crore (bases on upper price band). From the issue, it has reserved 200000 equity shares for its employees. Issue opens for subscription on 14.09.16 and will close on 16.09.16. Minimum application is to be made for 70 shares and in multiples thereon, thereafter. The company has issued all equity shares at par since inception till March 1997 and two bonus issues in the ratio of 1 for 1 in March 2006 and 9 for 1 in Marcy 2007. Post IPO its current paid up equity capital of Rs. 15.17 cr. to Rs. 21.47 cr. BRLMs to the issue are PNB Investment Services Ltd and Ambit Pvt Ltd. Link Intime India Pvt Ltd is the registrar to the issue. Post allotments, shares will be listed on BSE and NSE.

On performance front, for last four fiscals, the company has (on a consolidated basis) posted turnover/net profits of Rs.349.05 cr. / Rs. 4.81 cr. (FY13), Rs. 404.25 cr. / Rs. 13.27 cr. (FY14), Rs. 430.64 cr. / Rs. 21.60 cr. (FY15) and Rs. 509.94 cr. / Rs. 25.96 cr (FY16). Its export revenue increased in the total turnover for all these years from 33.91% to 54.71%. Its client list includes OEMs like Mahindra and Mahindra, Automotive Axles, John Deere India etc. If we attribute the latest earnings on expanded equity post IPO, then asking price is at a P/E of 17 plus. The company has no peers to compare with it in total model basis, however; it has stated Talbros Engg as its peer as it operates in one of the segment that is trading around 16 P/E.

On merchant banker’s front, Ambit Finance has not handled any issue in last three years. PNB has just one IPO of Dilip Buildcon in the recent past that gave returns on listing day.

Conclusion: Listing of the company will be in T group and hence speculative movement is ruled out. However, considering its niche play with rising top and bottom line and major thrust on exports, long term investors may consider investment in this issue.