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Incorporated in 2010, Harsha Engineers International Limited is the largest manufacturer of precision bearing cages, in terms of revenue, in organised sector in India, and amongst the leading manufacturers of precision bearing cages in the world.

* Company offer diversified suite of precision engineering products across geographies and end-user industries. Its business comprises: (i) engineering business, under which it manufacture bearing cages, complex and specialised precision stamped components, welded assemblies and brass castings and cages & bronze bushings; and (ii) solar EPC business, under which it provide complete comprehensive turnkey solutions to all solar photovoltaic requirements.

* It has approximately 50-60% of the market share in the organised segment of the Indian bearing cages market and 6.5% of the market share in the global organised bearing cages market for brass, steel and polyamide cages in CY 2021.

* The company supplies its products to customers in over 25 countries covering five continents i.e., North America, Europe, Asia, South America and Africa.

Outlook & Valuation: The company has managed to garner a lion-sized share in the Indian bearing cages market due to its first mover advantage as the company was the first player to persuade bearing players to outsource the cage manufacturing than producing it in-house. The ability to provide customized solutions, wide product offerings, and focus on quality & on-time delivery has entrenched their relationship with their customers. The bearing cage accounts for a small portion of the total cost of a bearing however, considering the complexity of the production process, critical function of a bearing cage, and quality requirements, it is generally observed that it becomes difficult and unviable to switch vendors post establishing a relationship. Additionally, the strategic location of their facilities has enabled them to penetrate global markets more efficiently and cost-effectively. The company’s products find their application in the automotive, railways, aviation & aerospace, construction, mining, agriculture, electrical and electronics, renewables sectors, etc. The government’s thrust on infrastructure, agriculture reforms, the revival of private CAPEX, and rising housing & real estate demand augurs well for the aforementioned sectors and the company’s prospects. The issue has been priced at a P/E of ~32.67, which appears to be fully priced in; nevertheless, the company is a proxy play on India becoming a global manufacturing hub theme, and considering the positive growth outlook, experienced first generation management team and competitive advantages, we have assigned “SUBSCRIBE” rating to the issue.

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