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Salient features of the IPO:

* Tega Industries Limited (TIL) is a leading manufacturer and distributor of specialized ‘critical to operate’ consumables products for the global mineral beneficiation, mining and bulk solid handling industry.

* The company focus end-customers are minerals processing sites involved in gold and copper ore beneficiation.

* TIL reported sales of Rs806 cr and PAT of Rs136 cr in FY21

Competitive Strengths

* A leading producer of specialized and ‘critical to operate’ products with high barriers to replacement or substitution 

* Insulating from mining capex cycles as products cater to after- market spends providing recurring revenue

* High value add and technology intensive products backed by strong R&D and focus on quality control

Valuation: At the higher price band of Rs453, the issue is priced at P/E of 22x on FY21 EPS.

Below are few key observations of the issue:

Global crushing, screening and mineral processing market size was estimated at $20 bn in 2020. Industry is forecast to grow at a CAGR of 6.3% and to reach market size of $36.9 bn by 2030. Owing to ore grade depletion, miners are required to process more ore to get the desired yield which will boost the demand for mineral processing equipment. Global mill liner demand is forecast to increase at a CAGR of 5.8% to $3.1 bn in 2030 from $1.7 bn in 2020. Capex spending for metal ores such as copper, gold, iron ore, coal, nickel, zinc and others during 2019 was estimated at $85 bn out of which copper and gold accounted for 60% of capex spending at $55 bn owing to their ore grades depletion. Lower ore grades are expected to drive higher capex within in industry thereby presents positive outlook for companies manufacturing mining consumable products for copper and gold mining activity.

Tega Industries Limited (TIL), incorporated in 1976, is a leading manufacturer and distributor of specialized consumable products for the global mineral beneficiation, mining and bulk solid handling industry. The company has portfolio of more than 55 products which are used by customers across different stages of mining and mineral processing, screening, grinding and material handling. TIL is the 2nd largest producer of polymer based mill liners and only player providing a hybrid liner across both large SAG mill & Ball mill.

The company has six manufacturing sites which comprise three in India (Dahej, Samali and Kalyani) and other three units in major mining hubs Chile, South Africa and Australia. Average capacity utilisation level of manufacturing units stood at 58% in FY21.

The company focus end-customers are minerals processing sites involved in gold and copper ore beneficiation accounting for 34.9% and 27.3% respectively of revenue as an average of FY19-FY21.

On products specific categories front, in the sequence of their usages in the minerals processing mines, after blasting to floatation, TIL’s products include chutes and its liners, grinding mill liners, trommels and screens, hydrocyclones, pumps and flotation parts and conveyor products.

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