TechEra Engineering IPO : Such was the buzz, as well as participation by investors in various categories, that TechEra Engineering (India) Limited’s initial public offering received robust demand up to the last day of the bidding process. Till the closing hour on the last day of bidding, the issue witnessed as many as 20,32,44,800 shares being tendered. The number stands high because the issue opened with just 29,12,000 shares on offer. This reflected a total subscription of 70 times. From this, it becomes clear that investors were highly interested in the issue of the IPO.
As per the data of Chittorgarh, the IPO is capable of fetching various sections of investors.
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Analysis of Investor Response
The Retail investors and NIIs gave an extremely strong response to the IPO. Both these classes of investors oversubscribed their portion considerably. The IPO opens with a retail investor quota, which is subscribed 66.52 times, indicating retail investor appetite for the issue is quite high. The NII component, which includes typically high net worth individuals, subscribed to the issue an unbelievable 128 times, again pointing to demand from the wealthier investors for the issue. The qualified institutional buyer (QIB) segment-which banks, mutual funds, and other financial institutions-went 31.22 times, which shows the confidence of the institution in its longer-term prospects.
IPO Overview
TechEra Engineering is seeking to raise about ₹35.90 crores through this issue. This would be a pure fresh issue of equity shares to the tune of 43.78 lakh shares. Consequently, the entire amount from the proceeds will go directly to the company, and not to existing shareholders selling stakes. The IPO is priced in a band of ₹75 to ₹82 per equity share of face value of ₹10 each.
Many investors await the date for allotment and listing details. Share allotment should be done on Thursday, 30 Sep 2024. Post-allotment, shares are going to list on NSE SME (Small and Medium Enterprises) platform. The tentative date of listing is Thursday, October 3, 2024. An IPO is being handled by the book running lead manager, SKI Capital Services Limited, while KFin Technologies Limited is acting as the registrar for the issue, thus ensuring that the process is duly managed with great efficiency.
Utilisation of IPO Proceeds
TechEra Engineering has outlined a number of areas on which the IPO proceeds will be channeled. It will first allocate all funds to capital expenditure, mainly for new machinery purchases. The company will look to increase and improve its manufacturing since it aims to compete with its rivals in the aerospace and defense markets, and thus, using advanced machinery is vital in sustaining its competitive advantage.
Another important chunk of the IPO proceeds will go towards taking care of the working capital requirements. Working capital in a capital-intensive industry like manufacturing is one of the more critical aspects for day-to-day operations; hence, TechEra Engineering has laid this principle as one of its cardinal objectives to ensure that liquidity is present and sufficient to cover its own current running operational expenses.
Some of the proceeds will also be utilized by the company to prepay or retire outstanding borrowings under some arrangements. These will reduce the debt load, consequently improving its financial condition, and free up some amount of resources for further growth. Lastly, the funds generated will be utilized for general corporate purposes and offsetting costs relating to the IPO itself.
About TechEra Engineering IPO
TechEra Engineering is a specialized house in the design, manufacturing, and supply of precision tooling and components mainly for aerospace and defense customers. The company also offers solutions in automation systems, which are highly sought after today since industries worldwide want their operations streamlined and efficiency improved. Its portfolio spans assembly toolings, jigs, fixtures, MRO toolings, ground support equipment, and precision machined components.
This means TechEra Engineering comes out with complex and highly precise parts, because of advanced manufacturing technologies like 5-axis machining and 3D modeling for design visualization. In aerospace and defense industries, these are tight tolerances and exacting standards, which makes these technologies critical to the company.
In various high-profile projects, the company has exposed itself, thereby more inculcating the reputation to the market. Some examples include the manufacture of tooling for the vertical fin assembly line of commercial aircraft and the production of a fighter wing skin layup tool which may be technically challenging and portrays a crucial ability of the company in carrying out large-scale and complex engineering projects. These facts were presented in the filing of the Draft Red Herring Prospectus of the company, which further highlighted its capabilities and experience.
Grey Market Premium Insight
Now, GMP for TechEra Engineering stands at ₹20 per share. That reflects good demand for the share of the company in the grey market. GMP is the difference between the IPO issue price and the expected listing price on the stock exchange. In other words, it gives an indication of how much the market wants or demands a company’s shares before listing.
In this context, since the IPO issue price for TechEra Engineering is ₹82 per share, the current GMP of ₹20 and possible listing at ₹102 per share at listing, it will account for a 24.4% premium over the issue price-the thing that investors would love to have. The GMP, however, is not an official figure and may change with the passage of time as it depends on market and investor sentiment.
Investment Consideration If the IPO of TechEra Engineering attracted high subscription rates from every category of investor, particularly through NII and retail segments, then it could prove to be an attractive investment opportunity with robust demand for shares in TechEra. The reasons for such a demand for TechEra’s shares might be many. First, TechEra has a credible past performance in the aerospace and defence fields. Second, it uses advanced technologies for manufacturing. Third, it boasts of inclusion in significant projects.
Plans like such to utilize the IPO proceeds on capital expenditure, working capital needs, and debt repayment depict growth and financial stability as they make use of the IPO proceeds towards the capital expenditures, working capitals, and repayments of debts. Invest in new machineries and therefore meet the working capital requirements, TechEra is better placed for further expansion and productivity. Furthermore, the decision to prepay or pay off outstanding borrowings is a positive indication that will strengthen the balance sheet of the company and free up more resources for future growth.
Key Risks and Considerations
While much looks rosily on the horizon for TechEra Engineering, the IPO investor should not forget that there will be certain risks associated with all investments. This company relies heavily on the industries of aerospace and defense, which do vary with government spending and global economic trends. Additionally, this is a very competitive marketplace for TechEra, and it will need to continue to invest in new technological advancements and innovation to remain competitive as well as grow its marketplace share.
They should exercise much caution when they decide to use the GMP as a basis for their investment decisions. Its insight into market sentiment is only obtained through an unofficial figure that may change within a short period of time. The company’s fundamentals, its financial health, and prospects for the long-term should benefit in aiding the above investment.
Conclusion
The phenomenal interest in the IPO of TechEra Engineering by all categories of investors can be gauged from the subscription rates-the intense demand for shares in the company. In precision tooling, and components for aerospace and defense, and advanced manufacturing technologies, the focus areas, put the company in good stead for growth ahead. With the IPO proceeds to be utilized for capital expenditures, working capital and debt repayment, the operational and financial foundation of the company is strengthened.
While the grey market premium states that the shares might list at a premium over the issue price, full due diligence is a necessity to consider an investment. This will help gauge the track record and growth prospects of the company as well as the overall market conditions to take a decision on investment in this particular IPO. This would require weighing up the potential rewards with the associated risks prior to plonking one’s capital.