Issue details: Dec 1, 2021- Dec 3, 2021
Price Band: Rs.443 - 453 per share
Minimum Lot: 33 shares
Minimum Application Amount: Rs. 14,949
Total Issue Size: Up to Rs. 619.23 cr. (The issue is 100% Offer for Sale)
Tega Industries Limited (“Tega”) 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, on the basis of sales as of June 30, 2021. The company commenced its operations in 1978 in India, with a foreign collaboration with Skega AB, Sweden. Globally, they are the second largest producers of polymer-based mill liners, on the basis of revenues as of June 30, 2021.
The company offers comprehensive solutions to marquee global clients in the mineral beneficiation, mining and bulk solids handling industry, through its 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 after-market spends on wear, spare parts, grinding media and power, which are regular operating expenses for their customers.
Tega’s product portfolio comprises of more than 55 mineral processing and material handling products which covers a wide range of solutions in the mining equipment, aggregates equipment and the mineral consumables industry. For the last 3 fiscals, they have presence in 513, 498 and 479 installation sites, respectively, in over 70 countries. As of June 30, 2021, its domestic and overseas customer base included 212 mining sites.
The company has 6 manufacturing sites, including 3 in India, at Dahej in Gujarat and at Samali and Kalyani in West Bengal, and 3 sites in major mining hubs of Chile, South Africa and Australia, with a total built-up area of 74,255 Sq. mts. They also have 18 global and 14 domestic sales offices located close to their key customers and mining sites.
For FY21, the company derives 86.42% of its revenue from operations outside India with North America, South America, EMER (Europe, Middle East and Russia), Africa, and Asia Pacific (South East Asia and Australia) constituted 13.74%, 24.71%, 15.49%, 22.62% and 9.85% respectively.
As an average of the last 3 fiscals, Tega’s top 10 customers accounted for only 29.19% of its revenue from operations. Since company’s products are critical to operate consumables for the mines, they were largely unaffected by the pandemic.
Particular (Rs. Crs)
Revenue from Operations
EBITDA Margin (%)
Net Cash Flows from operating activities
Debt to Equity
In terms of financials, from the last 3 fiscals, Tega has reported consistent growth in revenues while profits have doubled year on year. The company has delivered a strong EBITDA performance as it increased at a CAGR of 50.4%, and its EBITDA Margin has clocked a ~30 % CAGR from FY19-21.
As the company’s products are largely consumed in the after-market, it provides for stable recurring revenues at each client site. As a result, 74.29% of its sale of products and in FY21 resulted from repeat orders of spares. Moreover, a robust order book of Rs. 316.14 crore as of June 30, 2021 offer visibility to plan for future growth.
Tega has been gaining global market share which has increased to 5% in FY20 from 3% in FY18. In addition, the company has superior return ratios with ROE & ROCE at 24.76% and 22.23% respectively in FY21.
As of June 30, 2021, its aggregate outstanding borrowings was Rs. 184.24 crore and its aggregate cash and cash equivalent (including investments under current assets) were Rs. 252.48 crore, which makes the net debt position favourable.
· Gain market share and customer wallet share across high growth markets.
· To grow product offerings and capitalize on future trend by leveraging in-house R&D capabilities.
· Expand its manufacturing capabilities to achieve better economies of scale.
· Explore opportunities for inorganic growth.
· Improve operational efficiencies and expand margins.
· A leading producer of specialized and “critical to operate” products, with high barriers to replacement or substitution.
· As its products cater to after-market spends, it is insulated from mining capex cycles which provides recurring revenues.
· High value add and technology intensive products, backed by strong R&D and focus on quality control.
· Long standing market player with marquee global customer base and strong global manufacturing and sales capabilities.
· The company does not have long-term contracts or exclusive supply arrangements with any of its key suppliers. The failure of its suppliers to deliver raw material in the necessary quantities or as per the required schedule may adversely affect the company’s production processes.
· The company export its products to various countries and any substantial increase in import duties or imposition of new restrictions along with the unavailability of fiscal benefits enjoyed by them may have an impact on the results of operations.
· Any significant loss of repeat orders will impact its order book and limit the company’s ability to accurately forecast the demand for its products and services.
· Many of its products use raw materials which creates environmental risks. Thus, climate change and climate change-related laws and regulations concerning the mining industry may adversely impact its operations and markets.
Comparison with listed Indian Industry peers (as on 31st March 2021)
Based on the upper price band*
With an on-ground presence in all major mining locations, Tega Industries is well-positioned to cater to its customers across the world in developed countries as well as in emerging regions. Since mineral processing sites ordinarily refrain from switching and remain with an existing approved supplier, the company is well poised to embark on a new wave of growth. Moreover, going forward, the demand trends & developments related to copper and gold mining industries even though favorable, are expected to grow only at an average CAGR of around 6% till 2030.
The company has superior return ratios and a healthy balance sheet. In terms of valuation, at the upper price band of Rs. 453, the issue is valued at 22.11x based on FY21 earnings. Based on average EPS of the last 3 fiscals the P/E stands of Tega stands at 31.58x whereas that of AIA Engineering also stands at ~31.55x indicating that the issue expensively priced. Further, the issue is completely an offer for sale. Considering the above factors and that the IPO is highly likely to be oversubscribed as the issue size is comparatively smaller, investors are advised to ‘SUBSCRIBE’ to this IPO for LISTING GAINS only.