The initial public offering (IPO) of auto ancillary company Carraro India will open for subscription on Friday, December 20. The issue will remain available for public bidding till December 24.

The Pune-based company has fixed a price band of ₹668-704 per share for its ₹1,250 crore primary offering. Investors can bid for a minimum of 21 shares in one lot and in multiples thereof.

Carraro India IPO: Review

Analysts at Anand Rathi believe that the IPO is fairly priced and recommend a ‘Subscribe-Long term’ rating to the IPO.

At the upper price band, the company is valuing at a P/E (price-to-earning) of 45.83x, with an EV/EBITDA of 31.6x and market cap of ₹4,002 crore post issue of equity shares and return on net worth of 16.92%, the brokerage said.

It added that Carraro India is one of the leading tier 1 suppliers of transmissions systems and a key supplier of axles in the agricultural tractor and construction vehicle industries in India with competitive moat for mission critical and complex driveline components with customer-centric, one-stop shop offering customized solutions to a longstanding OEM customer base and strong, in-house R&D capabilities with proprietary IP rights to facilitate innovation of future-ready products along with longstanding relationships with marquee local and international supplier base.

Carraro India IPO: Anchor investors

The company has garnered ₹375 crore from anchor investors, ahead of its IPO opening for subscription.

Aditya Birla Sun Life Mutual Fund (MF), HSBC MF, UTI MF, Sundaram MF, Motilal Oswal MF, Kotak Mahindra Life Insurance Company, Bajaj Allianz Life Insurance Company, Tata AIA Life Insurance Company and SBI General Insurance Company are among anchor investors.

Carraro India IPO: OFS issue

Carraro India’s IPO is completely an offer for sale (OFS) of shares worth ₹1,250 crore by Carraro International S E, with no fresh issue component.

Since the entire issue is an OFS, all the proceeds from the IPO will go directly to the selling shareholder, rather than the company.

Half of the issue has been reserved for qualified institutional buyers, 35% for retail investors, and the remaining 15% for non-institutional investors.

Company description

Founded in 1997, Carraro India, a subsidiary of Carraro S.p.A, began its manufacturing journey with transmission systems in 1999 and axles in 2000.

The company started its operations using IP rights licensed from other entities within the Carraro Group and specialises in complex engineering products and solutions for original equipment manufacturer (OEM) customers.

It serves as an independent tier-1 provider, concentrating on axles and transmission systems for agricultural tractors and construction vehicles.

Carraro India operates two manufacturing plants in Pune — one for drivelines and the other for gears. These plants are equipped with advanced technologies for casting, machining, assembly, prototyping, testing, painting, and heat treatment.

As of September 2024, the company supplied its products to 38 manufacturers in India and six internationally.

Its key customers include large domestic and international OEMs. It exports to customers in Asia directly and indirectly, as well as to customers outside of Asia through Carraro Drive Tech Italia S.p.A.

Its key clients in the agricultural tractor sector include CNH, TAFE, Mahindra and Mahindra, John Deere India Pvt Ltd, Escorts Kubota, Action Construction Ltd, and International Tractors Ltd.

In the construction vehicle sector, it serves CNH, Bull Machines, Liugong, Manitou Equipment, Doosan, Escorts Kubota, Mahindra and Mahindra, and Action Construction Ltd.

Financials

On the earnings front, the company’s revenue from operations grew 4.44% to ₹1,770.45 crore in FY24 from ₹1,695.12 crore in FY23, while profit after tax rose 29.44 per cent to ₹60.58 crore in FY24 from ₹46.80 crore in FY23.

Axis Bank Limited, Bnp Paribas, Nuvama Wealth Management Limited are the book running lead managers of the Carraro India IPO, while Link Intime India Private Ltd is the registrar for the issue.

The allotment for the IPO is expected to be finalised on December 26. Carraro India IPO will list on BSE, NSE with tentative listing date fixed as December 30.