Harsha Engineers Rs 755 crore IPO: What you need to know before buying their shares

Harsha Engineers International Limited (HEIL), one of India's largest precision bearing cages, wants to raise Rs 755 crore through an IPO. The process will start from September 14 and go on till September 16, with each share costing you Rs 314-330. 

First, the key dates:

1. The public can subscribe to the shares from today, ie, September 14
2. The subscription period closes on September 16
3. Harsha Engineering will allot shares to applicants on September 21
4. If you don't get allotted shares, you will get a refund by September 22
5. If you are lucky to get shares, the shares will be credited to your Demat account by September 23
6. The company finally lists on the BSE and NSE, and trading begins on September 26

What kind of investment do you need to make?

1. If you want to apply for 1 lot, you have to buy at least 45 shares.
2. The price range for each share is between Rs 314 and Rs 330, which means you will have to pay a maximum of Rs 14,130 for 1 lot.  
3. Harsha Engineers will raise Rs 755 crore from this IPO by multiple means. The company will raise Rs 455 crore by issuing new shares to the public and the balance Rs 300 crore by selling old shares held by previous owners. 
4. 50% of the IPO quota is reserved for Qualified Institutional Buyers (QIB), ie. banks and mutual funds, 15% is reserved for High Net-worth Individuals (HNIs) and 35% is for us; ie, retail-category investors. 

How will the company use the IPO money? As Rs 300 crore will be received by selling to shareholders, Harsha Engineers will use the balance Rs 455 crore and spend this on multiple things: 

• Pre-payment or scheduled repayment of a portion of the existing borrowing availed by them
• Purchase of machinery
• Infrastructure repairs and renovation of existing production facilities and Indian offices
• General corporate purposes

What do Harsha Engineers International Limited do?

Harsha Engineers International Limited is the largest manufacturer of precision bearing cages in India and its exports make up nearly two-thirds of its revenue. The company supplies these bearing cages in over 25 countries, and operates under two segments:

• Engineering business: Harsha Engineers makes bearing cages (in brass, steel, and polyamide materials), complex and specialised precision stamped components, brass castings, etc. 
• Solar business: Harsha Engineers is in the business of solar engineering, procurement, and construction and provides comprehensive turnkey solutions to all solar photovoltaic requirements. 

What do the experts say? While many brokers like Hem Securities, Arihant Capital, Angel One, Choice Equity Broking, Motilal Oswal, and Nirmal Bang have recommended subscribing to this IPO, Religare Broking is neutral about it. 

But why are experts positive about this IPO?

1. HEIL products have wide applications in end-user industries (such as automotive, railways, aviation and aerospace, construction, mining, agriculture, electronics, and renewables) and thus it offers comprehensive solutions with multiple engineering products. 
2. HEIL has a consistent track record of growth and financial performance and is expected to see an increase in profit margins due to the EV market that is yet to grow in India, because of which Harsha's products will be more in demand. 
3. HEIL also enjoys long-standing relationships with leading clientele.
4. The company has strategically located domestic and international production facilities and warehouses.
5. Strong, experienced, and dedicated senior management team and well-qualified workforce.
6. HEIL enjoys 50-60% market share in the organised domestic bearing cages market, and about 6.5% share in the global organised outsourced market, meeting 75% of the global demand.
7. Also, its shares are reasonably priced as compared to its peers. 

But know the key issues that make this IPO risky: 

1. The company has recently completed a corporate reorganisation which could lead to administrative and operational difficulties.
2. Harsh might also have a high dependence on a limited number of customers.
3. Harsh Engineers have high exposure to foreign currency exchange rate fluctuations.
4. The company has certain contingent liabilities and capital commitments and if they materialise, it may affect the financials. 

So, will you apply for Harsha Engineers IPO?