Gala Precision Engineering Limited is making a significant entrance into the public market with its Initial Public Offering (IPO), which is expected to draw considerable attention from investors. Specializing in the design and manufacturing of precision components like High Tensile Fasteners, Disc & Strip Springs, Coil & Spiral Springs, and Wedge Lock Washers, the company serves a diverse range of industries, including Renewable Energy, Industrial, and Mobility sectors. Gala Precision's clientele consists primarily of major OEMs, Tier-1 suppliers, and channel partners, highlighting its importance in the supply chain of critical components.

Key Details of the Gala Precision Engineering IPO

The Gala Precision Engineering IPO is a Book Built Issue amounting to ₹167.92 crores. This includes a Fresh Issue of 2.55 lakh shares worth ₹135.34 crores and an Offer for Sale (OFS) of 0.61 lakh shares totaling ₹32.58 crores. The subscription period for this IPO opens on September 02, 2024, and closes on September 04, 2024. Investors can expect the allotment to be finalized on or about Thursday, September 05, 2024, with the shares likely to be listed on BSE and NSE around Friday, September 09, 2024.

The price band for the Gala Precision IPO is set between ₹503 and ₹529 per equity share, with a minimum lot size of 28 shares. This means that retail investors must invest at least ₹14,812, while High-Net-Worth Individuals (HNIs) are required to invest a minimum of 14 lots (392 shares), amounting to ₹207,368.

PL Capital Markets Private Limited is the book-running lead manager for the issue, and Link Intime India Private Limited has been appointed as the registrar.

Financial Performance and Valuation

Gala Precision Engineering has shown a strong financial performance over the past few years. The company's revenue has increased from ₹1,367.35 million in FY22 to ₹1,493.84 million in FY23 and has further grown to ₹1,767.90 million in FY24. This steady rise in revenue indicates the company's expanding market presence and the demand for its precision engineering products.

Similarly, the company's EBITDA has grown from ₹1,479.63 million in FY22 to ₹1,670.82 million in FY23, reaching ₹2,043.77 million in FY24. This growth in EBITDA underscores the company's operational efficiency and its ability to generate substantial earnings from its core activities. The Profit After Tax (PAT) has also seen a significant increase from ₹66.31 million in FY22 to ₹225.63 million in FY23 and currently stands at ₹225.32 million in FY24.

Given these financial metrics, Gala Precision Engineering is issuing shares at a pre-issue EPS of ₹22.28 and a post-issue EPS of ₹17.78. The pre-issue P/E ratio is 23.74x, while the post-issue P/E ratio is 29.75x, compared to the industry P/E ratio of 31.70x. The company's Return on Capital Employed (ROCE) for FY24 is 19.91% and the Return on Equity (ROE) is 23.59%. These indicators suggest that the IPO is fairly priced and presents a solid investment opportunity.

Also Read: Jeyyam Global Foods IPO Review - Issue Date, Price, GMP, Subscription, Allotment, Lot Size, and Details

Grey Market Premium and Subscription Status

As of now, the Grey Market Premium (GMP) for Gala Precision Engineering Limited IPO is expected to be in the range of ₹150 to ₹160, indicating potential listing gains of 30% to 31%. However, it's important to note that trading on the Grey Market is not regulated, and the price discovery before the listing of shares on the stock exchange is not guaranteed. Therefore, the GMP is mentioned for educational and informational purposes only.

The IPO has already garnered significant attention, with the subscription status as of 12:34 PM on September 02, 2024, showing that the issue is subscribed 2.24 times on the first day of its subscription period. This strong response reflects investor confidence in the company’s financial health and growth prospects.

Allotment Status and Objectives of the IPO

The allotment for Gala Precision Engineering Limited IPO is expected to be finalized on September 05, 2024. Investors can check their allotment status by navigating to the IPO allotment status page on the registrar's website and entering their application number, PAN, or DP Client ID. The shares will likely be listed on the stock exchanges on or around September 09, 2024.

The proceeds from the Fresh Issue will be utilized for several key objectives, including:

Setting up a new facility at Vallam-Vadagal, SIPCOT, Sriperumbudur, Tamil Nadu, for manufacturing high tensile fasteners and hex bolts, requiring ₹370 million.

Funding capital expenditure towards the purchase of equipment, plant, and machinery at Wada, Palghar, Maharashtra, with an allocation of ₹110.69 million.

Repayment/prepayment of certain borrowings, with ₹454.30 million earmarked for this purpose.

General corporate purposes.

Conclusion

Gala Precision Engineering Limited has positioned itself as a key player in the precision engineering sector, with a strong focus on innovation and operational efficiency. The company's financial performance, coupled with the strategic use of IPO proceeds, highlights its growth potential and commitment to expanding its market presence.

Given the fair pricing, strong financials, and potential listing gains, the Gala Precision Engineering IPO presents a compelling investment opportunity for both listing gains and long-term investment purposes. Investors are encouraged to consider this IPO as a valuable addition to their portfolio, given the company’s steady growth trajectory and strategic expansion plans.

Also Read: Gala Precision Engineering IPO Review - Issue Date, Price, GMP, Subscription, Allotment, Lot Size, and Details

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