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Salient features of the IPO:

* Delta Autocorp Ltd. (DAL), a manufacturer and seller of 2W & 3W EVs, is coming up with an IPO to raise around Rs. 51.66 – 54.60cr. The price band is Rs. 123 - 130 per share.

* The IPO is a fresh issue of Rs. 50.544cr. From the fresh issue net proceeds, the company will be utilizing Rs. 4.42cr for Funding of Expenditure towards Setting up an Electric Three-Wheeler Fabrication Plant & Painting Plant, Rs. 21.32cr for Investment in New Product Development, and Rs. 11.46cr for Funding of working capital requirement. Residual proceeds will be used for general corporate purposes.

* One of the promoter shareholders is participating in the OFS and is offloading 0.031cr equity shares. Post-IPO, the P&PG and public shareholders will have 70.73% and 29.27% stake in the company, respectively.

Key competitive strengths:

* Diversified product range

* Customer Centric Approach

* In house Research and Development of Products

* Cracking the distribution model

* Tapping into the mass premium segment

* Quality Standard Certifications & Quality Tests

* Experienced promoters and senior management team

Risks and Concerns:

* Risk of Defective Electric Vehicles Impacting Brand, Reputation, and Legal Liabilities

* Dependence on distribution network for sales

* Dependent on third parties for our transportation needs

* General slowdown in the economy

* Competition

Below are the key highlights of the company:

* India is experiencing a remarkable surge in the sales of electric twowheelers (E2Ws), signaling a transformative shift towards sustainable mobility. One of the key driving forces behind this growth is the range of incentives and government support provided to promote the adoption of electric vehicles (EVs).

* The two-wheeler market is projected to have a compound annual growth rate of 8.7% through 2029 when it will reach a value of about $218 billion. Although relatively few two-wheelers are now electric, this could soon change. In India, for instance, only about 4% of two-wheeler sales in 2021 were electric. Worldwide, however, is projected that 30% of two-wheelers will be electric by 2030.

* Incorporated on 20th May, 2016, Delta Autocorp Ltd. was originally formed and registered as a LLP and was converted to a Pvt. Ltd. company on 21st July, 2023. Later, the company was converted into Public Limited Company.

* DAL manufactures and sells 2W & 3W EVs using cutting edge components procured from reputed Original Equipment Manufacturers (OEMs) who use design & engineering specifications given by the company. It supplies specific components designed and compatible for company’s vehicles.

* The company operates under the brand name "Deltic”.

* Initially concentrating on the development of electric 3W prototypes, DAL marked a significant milestone in 2017 with the launch of first E-Rickshaw, boasting an impressive mileage of over 150 Kms.

* After observing market dynamics and adapting to changing customer preferences, DAL strategically broadened its product range to include electric 2W vehicles.

Below are the key highlights of the company:

* The company identified a whitespace in Bharat i.e. tier-2, tier 3 towns of India and beyond and hence, launched well designed full scooters suitable to run on Indian roads with high ground clearance, good footboard space, and a large seat at very reasonable price coming at a very pocket friendly price. Moreover, in the interest of longevity, cost efficiency, and customer safety the company is transitioning to Lithium Ferro Phosphate (LFP) batteries from Nickel-Manganese-Cobalt (NMC) batteries.

* Presently, the company’s product range encompasses electric scooters in the 2W category, along with electric rickshaws, electric loaders, and electric garbage carts in the 3W category along with spare parts and accessories of 2W and 3W like motors, DC-DC Converter, Speedometer etc.

* Currently, DAL’s business operates through its wide network of dealers. It is working with a more than 300 strong distribution network spread across 25 states & UTs of India with a vision to become a global brand rooted in India with products that are trend setting, cost effective, inspire post sales trust through excellent service, and adhere to practicality over gimmicks with customer obsession.

* DAL has secured a Letter of Intent (LOI) in December, 2024 from D. Kumar & Sales for the supply of 2,000 electric carts (Deltic Garbo) designated for waste collection. The total value of this order is Rs.31 crore (exclusive of applicable GST), reflecting a significant milestone in the growing order book.

* For the period ending 31st Oct, 2024, FY24, FY23 and FY22, the Electric 2W product segment contributes 43%, 38.5%, 49.9% and 65.1% respectively; Electric 3W segment accounts for 41%, 51.8%, 47.2% and 32% respectively; and spares and accessories segment accounts for 16%, 9.8%, 2.9% and 2.9% respectively.

* The company has two manufacturing facilties, Unit-I in Bardhaman, West Bengal of 1,15,000 sq. ft.; and R&D Division and Unit-II with 29,700 sq. ft. in Dundahera Industrial Area, Bagpat, UP.

Peer comparison and valuation:

Delta Autocorp Ltd. specializes in manufacturing 2W & 3W EVs, operating under the brand name "Deltic”. The company offers a wide range of e-scooters, e-rickshaws, and e-garbage disposal vans and e-loaders catering to diverse needs of the Indian consumer. The electrification trend is transforming all automotive vehicle segments, including shared mobility sectors like 3Ws, commercial vehicles, and taxis, which are adopting electric technologies for improved operating efficiency. India stands as one of the fastest-growing markets for Electric Two-Wheelers (E2Ws). A recent study suggests that electric twowheeler sales in India could exceed 80% by 2030.

At the upper end of its price range, DAL is demanding a P/E multiple of 24.2x, based on its FY24 EPS of Rs. 5.4, and an EV/Sales multiple of 1.9x, this valuation seems to be at a discount compared to its peers. With this expanding industry shift, we foresee a positive growth outlook for the company. Thus, we recommend a “SUBSCRIBE” rating for this issue.

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SEBI Registration no.: INZ 000160131