About the company:
Business Overview:
Divgi TorqTransfer are amongst the very few suppliers in India who have the capability to develop and provide system level transfer case, torque coupler and DCT solutions. They are one of the leading players supplying transfer case systems to automotive OEMs in India and the largest supplier of transfer case systems to passenger vehicle manufacturers in India. They are also the only player manufacturing and exporting transfer cases to global OEMs from India, and the only manufacturer of torque couplers in India. They also have the capability to develop and provide transmission systems for electric vehicles (“EVs”). They are in the process of designing and developing prototypes of transmission systems for EVs pursuant to receipt of a business award for this purpose.
Divgi-TTS manufactures and supply a variety of products under the broad categories of (i) torque transfer systems (which includes 4-wheel- drive (“4WD”) and all-wheel-drive (“AWD”) products); (ii) synchronizer systems for manual transmissions and DCT; and (iii) components for the above-mentioned product categories for torque transfer systems and synchronizer systems in manual transmission, DCT, and EVs. They have also developed (i) transmission systems for EVs; (ii) DCT systems; and (iii) rear wheel drive manual transmissions. They are one of the few companies who serve both as systems level solution provider as well as component kit supplier to global OEMs and Tier I transmission systems suppliers
Company’s diverse capabilities enable them to service customers across segments in the automotive industry, including passenger vehicles, utility vehicles and commercial vehicles.
They have a client base of global OEMs and global transmission systems suppliers, with their Top-5 customers accounting for 92.66%, 91.28%, 92.86%, and 86.94% of their revenue from operations for 6 months ended September 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively.
Divgi-TTS has 3 manufacturing and assembling facilities across India located at Sirsi in Karnataka, and Shivare and Bhosari near Pune in Maharashtra.
| Particulars ( Rs. In Cr.) | Q2FY23 | FY22 | FY21 | FY20 |
|---|
| Revenue from Operations | 133.72 | 233.78 | 186.58 | 159.07 |
| Revenue Growth (%) | - | 25.30% | 17.29% | - |
| EBITDA | 37.09 | 65.61 | 51.9 | 36.94 |
| EBITDA Margin (%) | 27.74% | 28.07% | 27.82% | 23.22% |
| Profit for the period | 25.66 | 46.15 | 38.04 | 28.04 |
| Profit Growth (%) | - | 21.32% | 35.66% | - |
| Net Profit Margin (%) | 18.66% | 19.08% | 19.51% | 16.42% |
| Net worth | 256.2 | 340.02 | 295.88 | 209.53 |
| EPS – Basic (?) | 9.32^ | 16.76 | 13.82 | 11.64 |
| EPS – Diluted (?) | 9.32^ | 16.76 | 13.82 | 10.18 |
Review
The dry spell of the mainboard IPO in 2023 seems to end as D-Street is excited about Divgi TorqTransfer Systems Limited which is set to hit the IPO market from March 1 to March 3. The company is amongst the very few automotive components entities in India that have the capability to develop and provide system-level transfer case, torque coupler,dual-clutch transmission solutions. The firm has comprehensive product portfolio and acceptance with large OEMs. Underpinned by the sound financials, their business model is supported by a consistent track record of revenue growth and profitability with a CAGR of 21.23% and 28.30% between FY20-22. From a valuation standpoint, based on the FY22 figures, the issue appears to be attractively priced at a P/E ratio of 35x when compared to its listed peers. However, the business has high customer concentration risk (91% of revenues comes from the top 5 customers and 54% is generated from 1 customer). Moreover, overseas sale is dependent upon China and Russia which exposes the company to the risks of geographical concentration.With a favorable future growth potential in the long run, we recommend investors to “Subscribe” to this IPO.
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