Happy Forgings IPO Review

Happy Forgings IPO is a book built issue of Rs 1,008.59 crores. The issue is a combination of fresh issue of 0.47 crore shares aggregating to Rs 400.00 crores and offer for sale of 0.72 crore shares aggregating to Rs 608.59 crores. Happy Forgings Limited is an engineering led manufacturer of complex and safety critical, heavy forged and high precision machined components.

IPO opensDec 19, 2023
IPO ClosesDec 21, 2023
IPO Size (Rs.)₹1,008.59 Cr
IPO Size (shares)11,865,802 shares
BreakupFresh issue only
Face Value:₹ 2
IPO Price in Rs :₹808 to ₹850
Minimum Lot17 Shares
Listing AtNSE , BSE
QIB Quota~50%
NII Quota15%
Retail Quota~35%
 Lead ManagerJm Financial, Axis Capital , Equirus Capital, Motilal Oswal

About Happy Forgings Limited:

  • Happy Forging Limited was incorporated in 1979.
  • It is the 4th largest engineering led manufacturer of complex and safety critical, heavy forged and high precision machined components in India as of Fiscal 2023 in terms of forgings capacity.
  • They, through their vertically integrated operations, are engaged in engineering, process design, testing, manufacturing, and supply of a variety of components that are both margin accretive and value-additive. 
  • The company primarily caters to domestic and global original equipment manufacturers (“OEMs”) manufacturing commercial vehicles in the automotive sector, while in the non-automotive sector, they cater to manufacturers of farm equipment, off-highway vehicles and manufacturers of industrial equipment and machinery for oil and gas, power generation, railways, and wind turbine industries.
  • Happy Forgings Limited is a leading player in the domestic crankshaft manufacturing industry with the 2nd largest production capacity for commercial vehicle and high horse-power industrial crankshafts in India.
  • It manufactures a wide range of heavy forged and machined products which include crankshafts, front axle beams, steering knuckles, differential cases, transmission parts, suspension products and valve bodies across industries.
  • Currently, the company operates 3 manufacturing facilities in Ludhiana.
  • Happy Forgings is promoted and founded by Paritosh Kumar.

Financials: Happy Forgings Limited

Particulars / Rs. croreStandalone Consolidated Consolidated Consolidated Standalone 
Revenue from Operations 672.90 599.80 1,196.53860.05 584.96 
Revenue Growth (%)  12.19% – 39.12% 47.03% – 
EBITDA  195.21 181.86 340.94 230.89 158.75 
EBITDA Margin (%)  29.01% 30.32% 28.49% 26.85% 27.14% 
Profit before Tax 159.26 156.05 280.03 192.05 117.06 
Net Profit for the period 119.3116.40 208.7142.29 86.45 
Net Profit Margin (%)  17.73% 19.41% 17.44% 16.54% 14.78% 
Share Capital 17.90 17.90 17.90 17.90 8.95 
Reserves 1,085.43 886.83 970.41 769.72 636.21 
Net Worth  1,103.33 904.73 988.31 787.62 645.16 
EPS – Basic & Diluted (₹)  13.3313.0123.32 15.90 9.66 
RONW (%)10.81%12.87%21.12% 18.07% 13.40% 
Net Asset Value (₹) 123.28 101.09 110.43 88.00 72.09 
Post issue Share Capital22.18    
IPO price850.0    
EPS Fy2347.0    
PE Fy2318.1    
EPS Fy24 (annualized)53.8    
PE Fy24  (annualized)15.8    
Market cap in Lacs3,770.7    
Market cap / Sales3.15    

Anchor Book:

 A total of 35,59,740 shares were allotted to a total of 34 anchor investors. The mutual fund share in the anchor portion amounted to 57.47% of the total anchor book. This allocation was to 23 mutual fund schemes belonging to 14 asset management companies (AMCs)..

Partial list of anchor investors.

Happy Forgings IPO: Salient Points

  • Promoter holding of 88.24%, will drop to 78.60% post the IPO.
  • PE Fund India Business Excellence stake will come down from 12% to 9%.
  • 80% of revenue comes from domestic market,
  • As of September 30, 2023, they served customers in over 9 countries.
  • Beginning with bicycle components, they have expanded our scope with three manufacturing facilities producing safety-critical parts for industries such as automotive, railways, agriculture, engine & power generation, oil & gas and construction & mining.
  • Happy Forgings Limited is among the few companies in India with the capability to manufacture and supply high precision safety critical components to leading OEMs including manufacturers of commercial vehicles, farm equipment, off-highway and industrial equipment and machinery for oil and gas, power generation, railways and wind turbine industries.
  • They are only the 2nd company in India to have a 14,000-tonne forging press or higher forging press and are among the 4 companies in India that possess 8,000 tonne forging press or higher forging press.
  • Company’s focus on the high HP engine segment insulates them from any potential EV disruption as hydrogen, CNG and LNG combustion engine technologies are expected to become prominent alternate powertrain technologies in this segment and crankshaft as a product is compatible to such combustion engines with minimal/ no alterations.
  • It also plans to diversify into light-weight aluminum forged and machined components, as also, new products for electric passenger vehicles,
  • Happy Forgings Limited is a supplier to each of the Top-5 Indian OEMs, by market share, in the medium and heavy commercial vehicle industry and 4 of the Top-5 Indian OEMs in the farm equipment industry by market share, in Fiscal 2023.
  • Company’s strength in machining and overall value addition to products has enabled them to achieve the highest EBITDA margin among the peers in the last 2 Fiscals.
  • They recorded an increase in their revenue from operations by 104.55% from ₹584.96 crore in Fiscal 2021 to ₹1,196.53 crore in Fiscal 2023.
  • Their comes 43% from HCV, 37% from farm equipment, 16% from off-highway and 4% from industrial.
  • Peers:
  • Its TTM EPS was Rs 22.5x. PE for some of the peers is MM Forgings,(18.0), Bharat Forge (83.6), Ramakrishna Forgings (44.5) , Sona BLW Precision(66.8) Craftsman Automation (36.8), CIE Automation (23).
  • Their gross margin of 54% and EBITDA margin of 29%,is quite higher than peers.
  • Happy Forgings IPO is coming at PE of 18x (FY23) and 15.8x (FY24 annualized)
  • I intend apply in Happy Forgings IPO. In my opinion it is on a strong wicket and has good growth visibility
  • GMP as reported on social media has been around Rs. 435.
  • Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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