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Salient features of the IPO:

* Sansera Engineering Limited (SEL) is an integrated manufacturer of complex and critical precision engineered components across automotive and non-automotive sectors.

* The IPO consists of a pure offer for sale of 1.72 cr shares by its existing shareholders and promoters.

Valuation:

At the higher price band of Rs744, the issue is valued at P/E of 34.8x on FY21 EPS.

Below are few key observations of the issue:

* SEL, incorporated in 1981, is a leading supplier of complex and highquality precision components to OEMs. Bengaluru-based company is largest supplier of connecting rods, rocker arms and gear shifter forks to two-wheeler OEMs and connecting rods and rocker arms to passenger vehicles in India.

* The company has 16 manufacturing plants out of which 15 are located in India and 1 in Sweden. As per the company, production lines are modular and fungible and can be deployed across products and segments.

* In FY21, SEL derived ~ 88.5% of revenue from automotive sector and 11.6% from non-automotive sector. Key auto components that the company manufactures under automotive segment are connecting rods, rocker arms, crankshafts, gear shifter forks and aluminium forged parts. Within the non-automotive segment, the company manufactures a range of precision components for the aerospace, offroad, agriculture and other segments, including engineering and capital goods.

* Business model is well diversified across customer base, geographical spread and product portfolio. As of FY21, SEL caters to 71 customers which includes 47 from automotive segment and 28 from nonautomotive segment. Revenue break-up on sub-segment wise include 50.4% from two wheelers, 24.1% from PVs and 13.1% from CVs, aerospace at 3.8%, off-road at 4.2% in FY21.

* Key two-wheeler customers of the company are Bajaj auto, HMSI, TVS Motors and Yamaha Motors. Maruti Suzuki and Honda Cars India are key customers under passenger vehicles category. SEL is a global supplier as 35% of revenue in FY21 was derived through exports to Europe, USA and other foreign countries.

* SEL is an integrated manufacturer of complex and critical precision engineered components which requires stringent quality requirement given their criticality to automotive systems. Owing to its expertise in critical components which requires complex engineering processes, the company has become largest supplier of connecting rods, rocker arms and gear shifter forks to TWs and PVs in India. This also represents entry barriers for the new players to enter these products segments. The company also maintains long standing relationship with marquee OEMs such as 34 years with Maruti Suzuki, 25 years with Bajaj Auto, 24 years with Yamaha Motors and 21 years with Honda Motorcycles (HMSI). Bajaj Auto is the largest customers for the company accounting for 20.7% of revenue in FY21.

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