Maharashtra-based Gala Precision Engineering is set to embark on an Initial Public Offering (IPO) as it recently filed preliminary papers with SEBI (Securities and Exchange Board of India). The IPO comprises 31,74,416 equity shares, with 25,58,416 offered as a fresh issue by the company and 6,16,000 through an offer-for-sale by existing shareholders.
Key Features of Gala Precision Engineering’s IPO:
- Fresh issue of 25,58,416 equity shares and an offer-for-sale of 6,16,000 equity shares.
- Promoter Vishanji Harshi Gala to be the major selling shareholder in the offer-for-sale.
- Proceeds to be used for a new facility in Tamil Nadu, equipment purchase, and debt repayment.
- DSS products, including disc & strip springs, cater to various sectors like renewable energy, railways, and automobiles.
- The company holds a 70% share in the domestic DSS market for the renewable industry.
Financial Highlights:
- Net profit increased by 240% YoY to Rs 22.6 crore for FY23, with revenue growing by 14% to Rs 165.5 crore.
- The net profit for H1 FY24 stood at Rs 10.13 crore on revenue of Rs 95.68 crore.
- Gala Precision Engineering maintains a comfortable financial risk profile with a gearing of 0.9 times and TOLTNW ratio of 1.4 times.
- Operating margin rose to 17.6% in FY23 from 13.1% in FY21, showcasing an improvement in profitability.
Strengths:
- Extensive promoter experience in the engineering and automotive industry.
- Diversified product profile and end-user industry, protecting against demand slowdown in a single sector.
- Comfortable financial risk profile with moderate leverage and healthy profitability.
- Improvement in operating margin driven by new products and overseas market expansion.
Weaknesses:
- Large working capital requirement with operations being working capital intensive.
- Exposure to cyclicality in end-user industries, impacting the company’s topline and profitability.
Liquidity:
- Adequate liquidity with expected cash accruals against debt obligations in fiscals 2024 and 2025.
- Bank lines were utilized 81% on average in the 12 months through March 2023.
- Cash and bank balance stood at Rs 12 crore, and the current ratio was 1.52 times as of March 31, 2022.
Gala Precision Engineering’s IPO aims to support its growth initiatives and capitalize on its strong market presence in the precision engineering sector.
