Tega Industries IPO Review

Kolkata-based mining player Tega Industries’ IPO is looking to raise up to Rs 619 crore through the public issue. Tega Industries’ IPO is entirely an offer for sale (OFS) of by promoters and PE investors TA Associates, which has nearly 15% stake in the company and will be completely exiting the firm. Tega Industries is producer of specialized products for mining.

Updates :

ANCHOR ISSUE: Ahead of its IPO, Tega Industries garnered Rs 185.77 crore from anchor investors. Ashoka India Equity Investment Trust Plc, Goldman Sachs, Kotak Funds – India Midcap Fund, Kuber India Fund, Elara India Opportunities Fund, and BNP Paribas Arbitrage are among the investors that participated in the anchor book. Domestic funds include SBI Mutual Fund, ICICI Prudential Mutual Fund, Axis Mutual Fund, HDFC Mutual Fund, Mirae Assets Tax Saver Fund, Aditya Birla Sun Life Trustee Private Limited, Kotak Mutual Fund and Tata Mutual Fund.

Tega Industries IPO Review : Video Presentation

About Tega Industries (India)

Tega Industries Limited commenced operations in 1978 with a foreign collaboration with Skega AB, Sweden. Later the promoters bought in the entire stake.

The company 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.

Has a wide product portfolio of specialized abrasion and wear-resistant rubber, polyurethane, steel and ceramic based lining components, used by their customers across different stages of mining and mineral processing, screening, grinding and material handling, including several consumables used in the process.

Tega has 6 manufacturing sites, including 3 in India, at Dahej in Gujarat and at Samali and Kalyani in West Bengal, and 3 in major mining nations like Chile, South Africa and Australia.

Tega Industries IPO: Financials

Salient Points

Globally, company it is the 2nd largest producer of polymer-based mill liners, on the basis of revenues as of June 30, 2021.
Acquired Tega Industries Africa (Pty) Ltd. in FY 2007; Chile based Tega Industries Chile SpA in FY 2011.
It also acquired Perth based Losugen Pty. Ltd.
Company received funding from Wagner Ltd., an entity affiliated with TA Associates, a global private equity firm.
It has focus on end-customers in mineral processing sites involved in gold and copper ore beneficiation, accounting for 35% and 27% respectively of sales for last 3 Fiscals. •For the last 3 Fiscals.
Company had an average presence in about 500 in each of the year in installation sites in over 70 countries.

Cons

Forex Risks fluctuations: company showed Rs. 16 cr forex loss in FY20, Rs. 28 cr forex gain in FY21.
Other risks of dependence on overseas markets.
Entirely OFS, with PE investor exiting completely.
Q1FY22 performance has been rather subdued

Tega Industries IPO: Assessment

Tega is a a leading producer of specialized and “critical to operate products, for mining industry.
The industry has high barriers to replacement products or substitution.
Tega caters substantially to after-market spends, providing stable recurring Revenues.
High value addition and technology intensive products
Has strong R&D and focus on quality control
Long standing market player ; marquee global customer base
High operational efficiency
High repeat business
Experienced management team
High entry barrier in a non-cyclical, high growth industry segment will sustain margins and growth. •Margins: Expansion from 18% in FY19 to 24% in FY21. •At the higher price band of Rs 453, the offer is made at around 22 times its EPS of Rs 20.6 for the period ended March 31, 2021
Listed peer AIA Engineering. trades at PE 31.
Tega Industries IPO compares favorably with its peer.
GMP last reported was about Rs. 425/-
I intend to apply in Tega Industries IPO.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in 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. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.