IPO Note - Tega Industries Ltd By Nirmal Bang
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Company Overview
Tega Industries Ltd. (Tega) is a leading manufacturer and distributor of specialized ‘critical to operate’ and recurring consumable products for the global mineral beneficiation, mining and bulk solids handling industry. Globally, they are the 2nd largest producers of polymer-based mill liners. Tega has 6 manufacturing sites, including 3 in India, at Dahej in Gujarat and at Samali and Kalyani in West Bengal, and 3 sites in major mining hubs of Chile, South Africa and Australia.
Details and Objects of the Issue
The issue of Rs 619 Cr comprises of Offer for sale of 13,669,478 Equity Shares and the proceeds will go to the Selling Shareholders, in proportion to the Equity Shares offered by them in the Offer for Sale.
Investment Rationale:
* Oligopolistic Market Structure
* Insulated from mining capex cycles, provides recurring revenues
* Marquee global customer base with strong global manufacturing and sales capabilities.
* Consistent growth, driven by operational efficiency and high repeat business.
Valuation and Recommendation
The global crushing, screening and mineral processing equipment faced some headwinds due to the pandemic. The overall industry witnessed a decline in demand. However, with the re-opening of the global economy the industry is likely to grow at a CAGR of 6.3% by 2030.
We believe Tega is well placed across the value chain of a mineral processing as it provides wide range of products and solutions. The company uses strong technology that is backed by R&D and expertise, which provides a distinct and entry barrier for the company. Tega has marquee global customers and a robust order book position of Rs 316 Cr, which are key positives for the company. On financial front, company’s performance has been strong wherein Sales/EBITDA grew at a CAGR of 8%/25% between FY19-21. The company has an attractive ROE of 22% and is available at P/E of 22x FY21. We are positive on this company with the growth momentum likely to continue going forward and recommend “Subscribe to the issue”.
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