IPO Rush: Decoding the Qualitative Factors and Strengths of Gala Precision Engineering Ltd
Gala Precision Engineering Ltd.'s initial public offering (IPO) is open for subscription. Through this IPO, the company plans to raise ₹167.93 crores in the upper price band. The price range of the shares is pegged between ₹503 and ₹529. If you are wondering what the basis for this offer price and the company's strengths is, read on.
4 Qualitative Factors and the Competitive Strengths of Gala Precision Engineering Ltd
Given below are the qualitative factors and the basis of the competitive strength which the company has come up with the offer price:
1. Well established manufacturer of precision engineering components with a diversified product portfolio and diverse market
The company has experience in designing, manufacturing, and applied engineering of high-performance standardised and customised disc and strip springs. With a global clientele exceeding 175 customers, the company exports to over 25 countries, encompassing major markets such as Germany, Denmark, China, Italy, Brazil, the USA, Sweden, and Switzerland. These countries contribute 37.53% of its total sales as of March 31, 2024. The company also cooperates with global research institutes in Germany and India for new product testing and new process validations.
2. Well-equipped manufacturing facilities along with in-house design and other capabilities which offer scale, flexibility, and comprehensive solutions
The company operates two manufacturing facilities in Wada District Palghar, Maharashtra, equipped with capabilities to design, develop, and manufacture diverse product portfolios. It is also setting up a new manufacturing facility in Vallam-Vadagal, SIPCOT, Sriperumbuddur, Tamil Nadu, to develop various high-tensile fasteners to add to its existing product portfolio and introduce new products like bolts. Its manufacturing facilities are certified with international standards like IATF 16949 and ISO 9001:2015.
3. Track record of consistent financial growth and performance characterised by operational efficiency and high repeat business
The company has shown a consistent track record of growth and profitability. From fiscal 2022, its total income registered a CAGR of 17.53% to reach ₹204.377 crores in fiscal 2024. From fiscal 2022 to fiscal 2024, the company's gross profit margins were consistent, ranging from 59.26 % in fiscal 2022 to 59.15 % in fiscal 2024 (see table).
| Particulars | FY 24 | FY 23 | FY 22 |
|---|---|---|---|
Total income (in ₹ crores) | 204.377 | 167.082 | 147.963 |
EBITDA (in ₹ crores) | 40.589 | 28.941 | 22.351 |
EBITDA margins (%) | 19.86% | 17.32% | 15.11% |
Profit after tax (PAT) before exceptional items (in ₹ crores) | 24.641 | 14.453 | 6.631 |
PAT after exceptional items (in ₹ crores) | 22.332 | 24.212 | 6.631 |
Return on net worth before exceptional items (%) | 23.27 | 17.28 | 11.18 |
Return on net worth after exceptional items (%) | 21.38 | 28.94 | 11.18 |
4. Long-standing customer relationships with both Indian and global OEM and Tier 1 players
Gala Precision Engineering Ltd has established long-standing relationships with its customers. Its diverse product portfolio helps cater to a broad range of customers. It has served over 175 customers in 25 countries. The company's long-standing relationships with its customers indicate its commitment to high- quality products and comprehensive solutions.
The company has long-standing relationships with OEMs, Tier 1 players and channel partners ranging from 4 years to more than 15 years.
Wrapping it up
If you want to invest in the Gala Precision Engineering Ltd IPO, go through the company’s red herring prospectus for an overall view of the company and its various aspects. Ensure you know the risk factors and that the IPO aligns with your goals.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.
Investments in securities market are subject to market risks, read all the related documents carefully before investing. Please read the SEBI prescribed Combined Risk Disclosure Document prior to investing. Brokerage will not exceed SEBI prescribed limit.
