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Industry : Engg – Industrial Equipments

Gala Precision Engineering Limited View all IPOs

Price Band

Rs 503 – Rs 529

Gala Precision Engineering Limited is going public with a fresh issue and an offer for sale. The issue opens on 02nd September 2024.

MOJO CALL

Why

MOJO CALL

Avoid

Neutral

Long standing relationship with Indian and Global OEMs

The company has built strong relationships with both Indian and global OEMs, with partnerships spanning from 4 to 17 years. Becoming a qualified vendor for these companies involves a rigorous qualification process that can take 12 to 24 months, during which multiple audits are conducted to ensure the company's technical capabilities.

Robust growth from the Mobility segment

In FY2024, the company generated 28.5% of its revenue from the mobility segment, a significant increase from 19% in FY2022. Over the past two years, this segment has experienced a growth of 107%, making it the fastest-growing among the company's three segments. The mobility segment's expansion is fueled by the growing applications in the automotive and railways sectors.

Strong presence in International market

The company exports its products to various countries across Europe, North America, and Southeast Asia. In FY2024, 38% of its revenue was generated from exports. Additionally, the company holds approximately a 2% share in the global Disc & Strip Springs (DSS) market and a 10% share in the domestic DSS market.

Heavy dependence on steel as a raw material

The company relies heavily on steel as a key raw material, which accounted for 46.8% of its total expenses in FY2024. The company does not have exclusive supply agreements with its suppliers and purchases raw materials on a spot basis. Additionally, the top 10 suppliers contributed to more than 50% of the company's total purchases in FY2024.

Valuations

Based on the FY2024 financials, the company is targeting a P/E ratio of 30x and a market cap-to-sales ratio of 3.3x, which is relatively lower than the industry average of 40x. Therefore, we recommend subscribing to this issue.

Issue Details

Issue Opens	02nd September 2024
Issue Closes	04th September 2024
Price Band	Rs 503 – Rs 529
Issue size (Upper Band)	Rs. 167.93 Cr
Issue Type	FRESH ISSUE & OFFER FOR SALE
Market cap (based on upper band)	Rs. 670.24 Cr
Sales- March 2024 (Rs./Crs)	202.55 Cr
Net Profit - March 2024 (Rs./Crs)	22.3 Cr
Industry	Engg – Industrial Equipments
Promoters	KIRIT VISHANJI GALA AND SMEET KIRIT GALA
Lead Manager	PL Capital Markets

Objective of the Issue

Details

Objectives of the Issue Offer for sale – Rs 32.59 cr & Fresh Issue – Rs 135.34 crThe Objectives of the Offer are to:
1. Setting up a new facility at Vallam-Vadagal, SIPCOT, Sriperumbuddur, Tamil Nadu for manufacturing high tensile fasteners and hex bolts – Rs 37 crore
2. Funding capital expenditure requirements towards purchase of equipment, plant and machinery at Wada, Palghar, Maharashtra – Rs 11.07 crore
3. Repayment/ prepayment, in full or part, of certain borrowings availed by the company – Rs 45.43 crore
4. General corporate purposes – Rs 41.84 crore

List of Shareholders Selling Their Stake

Name	Type	Value of Shares (in Rs)	% of OFS
Taramati V Gala	Promoter Group	20,37,70,800	63%
Kirit Vishanji Gala HUF	Promoter Group	4,18,96,800	13%
Nayna Gala	Promoter Group	2,64,50,000	8%
Satish Kotwani	Individual Investor	2,11,60,000	6%
Hemlata Dhiraj Shah	Individual Investor	1,24,84,400	4%
Dhiraj Nanchand Shah	Individual Investor	1,48,12,000	4%
Rupa Sunil Mehta	Individual Investor	52,90,000	2%

Business Operations

About Company

Gala Precision Engineering is a manufacturer of precision equipment such as technical springs (which include disc & strip springs (DSS) and coil & spiral springs (CSS)) and special fastening solutions to OEMs and channel partners in the renewable energy sector (wind and hydro power), various industrial sectors such as electrical, off-highway equipment, infrastructure and general engineering, mobility segments such as automotive and railways.

The company distributes its products to various countries, including Germany, China, Italy, Brazil, the USA, among others. It held approximately a 2% market share in the global DSS market in CY2023.

The company operates two manufacturing facilities in Wada, Palghar. It is also establishing a new manufacturing facility in Vallam-Vadagal, Tamil Nadu, to produce high-tensile fasteners and expand its existing product portfolio.

Segment Revenue Breakup

Revenue Breakdown by Segment:
Segment	FY2024	FY2023	FY2022
Springs Technology	80%	84%	78%
Fastening Solutions	19%	14%	15%
Surface Engineering Solutions	1%	2%	7%

Financials

Financial Overview

The company’s revenue grew by 39% between FY2022 and FY2024 and stood at Rs 202.5 crore for FY2024.

In FY2024, the company’s Return on Net Worth stood at 23.3%, an improvement compared to 17.3% and -11.2% in FY2023 and FY2022, respectively.

For FY2024, the operating margins for the company improved to 19.86%, from 17.32% recorded in FY2023 and 15.11% recorded in FY2022.

Consequently, profit margins for FY2024 also improved to 11.89%, from 8.65% and 4.48% recorded in FY2023 and FY2022, respectively.

The company has been able to generate positive cash flow from operations for the last three years. The company reported a CFO of Rs 15.6 crore in FY2024.

As of 30th June 2024, the company had a debt of Rs 56.5 crore (including lease liabilities).

Financial Performance (Rs/crore)

Rs./Crs	FY 24	FY 23	FY 22
Revenue	202.6	165.5	145.3
Net Profit	22.33	24.21	6.634