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Industry : AUTO ANCILLARY

Happy Forgings View all IPOs

Price Band

Rs. 808 – Rs. 850

Happy Forgings is going public with a Fresh Issue and an Offer for Sale. The issue opens on 19th December 2023.

MOJO CALL

Why

Avoid

MOJO CALL

Avoid

Neutral

Good financials but lacking in the EV game

Over the last two years, the company has demonstrated impressive financial performance, with remarkable growth rates of 43% in revenue and 56% in net profit.
However, a potential concern lies in the fact that 70% of the company's revenue is derived from its top 10 customers, posing a risk of revenue loss if any of these clients decides not to continue their association. The share of EVs is constantly increasing and while the company caters to commercial vehicles, crankshafts that make up 45% of its revenue are not used in EV passenger vehicles whose share in the vehicles sold is increasing yearly.

Valuations

The company is asking for a PE of 38x and a market cap-to-Sales of 6.6x seems expensive and doesn’t leave much room fro capital appreciation. Hence, we recommend avoiding this IPO

Issue Details

Issue Opens	19th December 2023
Issue Closes	21st December 2023
Price Band	Rs. 808 – Rs. 850
Issue size (Upper Band)	Rs. 1009 Cr
Issue Type	FRESH ISSUE & OFFER FOR SALE
Market cap (based on upper band)	Rs. 8007 Cr
Sales- March 2023 (Rs./Crs)	1202 Cr
Net Profit - March 2023 (Rs./Crs)	209 Cr
Industry	AUTO ANCILLARY
Promoters	PARITOSH KUMAR
Lead Manager	JM FINANCIALS

Objective of the Issue

Details

Objectives of the Issue – Fresh Issue & Offer for Sale – Rs. 1009 cr

The Objectives of the Offer are for:
1. Purchase of Equipment
2. Repayment of Loans
3. General corporate purposes

List of Shareholders Selling Their Stake

Name	Type	No. of shares	% of OFS
Paritosh Kumar Garg	Promoter	4,922,445	69%
India Business Excellence Fund	Investor	2,237,475	31%

Business Operations

About Company

Happy forgings is involved in the business of forging metal and manufacturing auto components for Commercial Vehicles, Farm Equipment, Off shore Vehicles and other Industrial Uses.

Its Products include:
1. Crankshafts
2. Front Axle components
3. Suspension products
4. Components for Wind turbine, Oil & Gas, and Railways
4. ransmission parts

The company has a premium clientele including the likes of ISUZU, Mahindra & Mahindra, Ashok Leyland, Dana India, IBCC, JCB India.

Segment Revenue Breakup

Revenue Breakdown by Segment:
Segment	Q1FY24	FY 23	FY 22	FY 21
Forging products	16%	21%	24%	27%
Machined products	84%	79%	76%	73%

Financials

Financial Overview

The company’s revenue has grown at a CAGR of 43% over the last two years while net profit grew by 56%.

In FY23, The company’s Return on Equity stands at 24% which has improved in the last two years where it was 16% in FY21

The Net profit margin of the company is 17% in Q1FY24 while the EBITDA Margin is 29%. Both these metrics have seen an increase over the last two years.

The company has generated positive cash flow from operations in all years, in FY23 the company reported a CFO of Rs 209 crore, an increase from the Rs 50 crore in FY21

Financial Performance (Rs/crore)

Rs./Crs	H1FY24	FY 23	FY 22	FY 21
Sales	676	1202	866	591
Net Profit	119	209	142	86