Introduction:
2023 proved to be a blockbuster year for Indian stock market investors. As they gear up to welcome 2024, they can end this year on a high. A gamut of promising companies are looking to exploit the prevailing bull market by launching their Initial Public Offerings (IPOs). Happy Forgings Limited is one such company that has created a significant buzz among investors.
Happy Forgings IPO opens for public subscription on Tuesday, 19 December 2023 and will comprise a fresh issue and an offer for sale. The company has fixed the price band for the IPO as Rs. 808 to Rs. 850 per equity share. Keep reading to know more about the Happy Forgings IPO and decide whether to invest.
About Happy Forgings Limited
Happy Forgings Limited commenced its operations in 1979 primarily as a forging company and ventured into the manufacturing of high-precision machine components later. The company’s product portfolio includes crankshafts, pinion shafts, steering knuckles, differential housings, axle carriers, and valve bodies.
For the Financial Year 2022-23, Happy Forgings Limited was the fourth-largest manufacturer of forging and high-precision machine components in India. It specifically caters to domestic and global Original Equipment Manufacturers (OEMs) in diverse industries, including automotive, power, oil and gas, railways, and wind turbines. Some of the company’s marquee clients include Ashok Leyland, JCB India, IBCC Industries, SML ISUZU, Swaraj Engines, and Mahindra and Mahindra.
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Key Strengths of the Company
Below are the key strengths of Happy Forgings Limited as highlighted in the company’s Red Herring Prospectus (RHP):
- The company has more than 40 years of experience in the industry and has emerged as a leading player since its inception
- It has consistently maintained the highest EBITDA margin compared to its peers. The revenue from operations has increased by over 100% between FY21 and FY23
- The company’s client list includes the top five Indian OEMs in terms of market share in the commercial vehicles and farm equipment industries
- The company has a long-standing relationship with marquee clients and has established itself as a trusted supplier
- The company exports its products across nine countries, including Brazil, Italy, Japan, Sweden, Spain, Thailand, Turkey, the United Kingdom, and the United States of America
- Integrated manufacturing facilities with in-house process designing and product development capabilities
- The company has constantly invested in machinery and equipment to expand its manufacturing capacity and seize growth opportunities in the market
- Boasts highly experienced promoters and senior management teams, which have been instrumental in the company’s growth
Key Risks or Weaknesses Highlighted
The key risks or weaknesses associated with Happy Forgings Limited include:
- The company derives a significant portion of its revenue from the top ten clients. Loss of business or unhealthy relationships with these clients can adversely impact the company’s financial health
- The company depends heavily on specific industries, including automotive, farming, etc. Should these industries face downturns, it could impact the company’s business
- The company has to maintain strict adherence to regulatory and quality control guidelines. The inability to meet these standards may result in the loss of business
- The company buys raw materials from a limited number of suppliers. Any disruptions in supply-chain management can hamper the entire manufacturing cycle
- The company is exposed to risks associated with currency exchange rate fluctuations and volatility in the prices of raw materials
Core Financials of the Company
The company’s revenue from operations has thrived, going from Rs. 5,849.58 million in FY21 to Rs. 11,965.30 million in FY23. The profit and net worth of the company have also grown at a steady rate. The table below depicts the key financials of Happy Forgings Ltd. for the last three financial years:
*Amount in Millions
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Details of the IPO
The table below illustrates crucial details of the Happy Forgings IPO:
Should you subscribe?
Considering the robust financials of the issuing company and the prevailing bull markets, it makes sense to subscribe to Happy Forgings IPO. However, after considering other factors, such as your investment goals and risk appetite, you must decide.
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