Introduction
Gala Precision Engineering IPO: Gala Precision Engineering Ltd is all set to enter the Indian Stock Market through an Initial Public Offer, opening on 2nd September 2024 and closing on 4th September 2024. The IPO becomes not only a critical milestone for the company but also an exciting opportunity for investors looking to invest in a promising player within the precision engineering industry. In this article, I explore all the key details of the IPO of Gala Precision Engineering regarding its price, GMP, financial performance, and other aspects which make this IPO interesting. Some of those aspects are grey market premium, financial performance, and what makes this IPO worth a look.
Gala Precision Engineering IPO Price and Details
The Gala Precision Engineering IPO is priced in the range of ₹503 to ₹529 per equity share. This pricing will give an idea to the investors about the approximate quantum of investment required in the said issue. The total issue size of the IPO is approximately ₹167.93 crores, which can be segmented into:
- Fresh Issue: In this case, fresh issue comprises ₹ 135.34 crores. This portion of the IPO would directly add to the company through an addition of new capital, used in implementing its expansion plans or growth plans.
- Offer for Sale (OFS): The OFS part is pegged at ₹ 32.59 crores, which represents the shares being sold by the existing shareholders to provide an exit opportunity for them and at the same time give new investors an opportunity to create a stake in the company.
Key Dates
Following are the key dates that the investor should keep in mind for Gala Precision Engineering IPO:
- IPO Opening Date: September 2, 2024
- IPO Closing Date: Sep 04, 2024
- Allotment Date: Sep 05, 2024
- Listing Date: Sep 09, 2024
Market Lot
Investors looking to subscribe to the Gala Precision Engineering IPO must make a bid for at least one lot consisting of a minimum of 28 shares. At the higher price band of ₹529, the minimum investment would be approximately ₹14,812. An applicant may apply for more than one lot based on investment style and budget.
The shares will be listed in both BSE and NSE, and there is sufficient liquidity and trading available post listing to the investors.
Gala Precision Engineering IPO GMP (Grey Market Premium)
The GMP is the unofficial market for trading of shares before the company gets listed on the stock exchanges. Currently, the GMP for the Gala Precision Engineering IPO is ₹200 approximately. In other words, shares have been traded in the grey market at ₹200 premium over the upper price band of ₹529, translating into an effective grey market price of ₹729.
GMP gives useful market sentiments and can give investors an idea about the possible performance of the stock on listing. A high GMP generally tends to indicate strong demand and positive investor sentiment and might also mean that the IPO opens at a premium. Yet, one must never forget that GMP is mere speculation and not an official indication; therefore, the same should be looked upon in totality with other factors by the investor for making his investment decision.
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Overview of the Company
Gala Precision Engineering Limited was founded in 2009. This company was started as a precision component manufacturing organization that very quickly came to the fore as the premier manufacturer of precision components. The key areas of Gala Precision involve manufacturing excellent technical springs and fastening solutions, an indispensable component of almost every industry in general. Gala Precision deals in the following array of products:
- Disc and Strip Springs-DSS: These are used across mechanical systems that require high reliability of performance with oscillating loads.
- Coil and Spiral Springs: These types of springs are very crucial in many applications, including automotive to industrial machinery.
- Special Fastening Solutions: Such products come with very specialized requirements and involve providing special solutions to fasten components in complicated assemblies.
Gala Precision Engineering serves the industries of renewable energy, automotive, and general engineering. It has high exposure in wind energy due to the supplies of key components for wind turbines, which is at an all-time high due to the shift towards renewable energy.
Operating globally, Gala Precision Engineering has over 175 customers in use across more than 25 countries worldwide. It also has a strategic office in Frankfurt, Germany, where the company makes efforts to win contracts from European customers and conforms to international standards of quality, such as the German DIN.
Financial Performance
Investors will be eager to know the financial health of Gala Precision Engineering. While the company has been posting steady growth in the last couple of years, there are fields that may raise eyebrows.
Financial Highlights
- Revenue Growth: In the financial year ending on March 31, 2024, Gala Precision Engineering has recorded revenues of ₹ 204.38 crores. It represents a growth of 22% over the corresponding period a year ago and reflects thereby the ability of the company to reach more markets and increase its volumes of sales. This steady revenue rise is definitely an indicator of good operations of the company.
- Profitability: But despite this top-line growth, the company’s PAT contracted 8% in FY24 to ₹22.33 crores as against ₹24.21 crores in the previous year. Though this fall in profitability may sound an alarm, there has to be a strong reason for that, either increased cost of operation or investment in expansion.
- EBITDA and Margins: EBITDA for FY24 surged 40% to ₹142.2 crores. The increase in EBITDA was underpinned by a stretched EBITDA margin at 14.6%, which indicates that the firm is getting better in terms of operational efficiency-a high factor when it comes time, if ever, for it to maintain profitability in the longer term.
- Return Ratios: ROE for FY24 increased to 10.74%, indicating the efficiency of the firm in utilizing shareholders’ equity to yield a profit. ROCE has remained healthy at 18.39%, indicating thereby that the company utilizes its capital efficiently to yield returns.
While the financial performance of Gala Precision Engineering is mostly good, the drop in PAT has been minimal and could be a slight cause for concern. Investors should look more in-depth into the financials to determine why this decline is occurring and if it impacts the long-term growth prospects for the company.
Objectives of the IPO
Therefore, the funds mobilized through the Gala Precision Engineering IPO shall be used judiciously for fulfilling the expansion plans of the company and enhancing its financial health. The main purposes of utilizing the proceeds of IPO are:
- Gala Precision proposes to establish a new manufacturing: unit at Vallam-Vadagal, SIPCOT, Sriperumbudur, Tamil Nadu. The facility will produce high tensile fasteners and hex bolts, items presently in demand in various industries.
- Capital Expenditure: A part of the proceeds to be utilized towards procuring new equipment and machinery in the company’s existing manufacturing facility at Wada, Palghar, Maharashtra, shall aid the enhancement of production without compromising on quality standards.
- Repayment of Borrowings: Gala Precision Engineering proposes to repay/prepay a part of borrowings from the proceeds of the IPO. This would reduce the debt burden of the company, decrease interest costs, and prune financial leverage, thereby making the company more resilient to economic fluctuations.
- General corporate purposes: The balance would be utilized for general corporate purposes, affording Gala flexibility to meet a range of operational needs and realize potential growth opportunities.
Gala Precision Engineering IPO Review
The potential rewards must be weighed against the risk in investing in any IPO. Following are some factors an investor should consider when weighing the pros and cons regarding investment in the IPO of Gala Precision Engineering:
Pros
- Strong Market Presence: Gala Precision Engineering is one of the main companies in the precision engineering sectors, especially on technical springs and fastening solutions. A strong market presence combined with a well-established customer base forms a very good foundation for further expansion.
- Diverse Product Portfolio: The company has a diversified product portfolio, meeting the needs of many industries that include renewable energy, automotive, and general engineering. This ensures that dependence on one industry in particular will be greatly minimized, with more openings toward further stability and avenues for growth.
- Global Reach: Gala Precision Engineering operates in over 25 countries across the globe for more than 175 customers. Such global reach would not only avail revenue stability but also position it to tap into growth opportunities arising internationally.
- Positive Market Sentiment: That the GMP is as high as ₹200 depicts high investor interest in the IPO. It tells us that the shares may perform well once listed. Mostly, positive market sentiments translate into listing gains, thus making the IPO an opportunity to take advantage of.
Cons
- Decline in Profitability: Even a marginal decline in PAT in FY24 may raise concern pertaining to the ability of the company to sustain its profitability with scale operations. Investors should carefully evaluate the reasons contributing to this decline and its implications for future performance.
- Economic Dependence: The company’s performance is highly correlated with economic conditions and demand for precision components. Economic downturns or a shift in industry demand could adversely affect the company’s financial performance.
- Indebtedness Level: While the firm intends to repay part of its indebtedness through IPO proceeds, outstanding borrowings may present a potential risk if not properly managed. High debt levels eventually burden the company and may especially suffer in an unfavorable economic environment.
- Competition in the Market: The precision engineering industry is very competitive; therefore, there are a number of players competing for a share of the market. To stay on top, Gala Precision Engineering will continuously have to innovate and improve its products to keep it ahead of the competitors.
Conclusion
The Gala Precision Engineering IPO is indeed a great opportunity to invest in one of the most sturdy companies in the field of precision engineering. With a diversified product profile, increasing international presence, and strategic expansion plans, Gala is well-placed for future growth. However, detailed research and considerations shall always be made on the financial performance, market conditions, and other associated risks by an investor before investment in the company.
Closer the IPO dates, the most important factor would be to keep a constant eye on subscription trends and GMP to make an effective investment decision. If you are positive about the future of precision engineering and believe in growth potential for Gala Precision Engineering, this IPO may be a good addition to your investment portfolio.
Frequently Asked Questions – Gala Precision Engineering IPO
1. What is the price range for the Gala Precision Engineering IPO?
The price range for the Gala Precision Engineering IPO is set between ₹503 and ₹529 per share. Investors can apply for shares within this price band during the IPO subscription period.
2. When will the Gala Precision Engineering IPO open and close for subscription?
The Gala Precision Engineering IPO will open for subscription on September 2, 2024, and will close on September 4, 2024. Interested investors need to apply for shares within this window.
3. What is the Grey Market Premium (GMP) for the Gala Precision Engineering IPO?
As of the latest updates, the Grey Market Premium (GMP) for the Gala Precision Engineering IPO is approximately ₹200. This suggests strong demand and positive sentiment towards the IPO in the grey market.
4. How will Gala Precision Engineering use the funds raised from the IPO?
The funds raised from the Gala Precision Engineering IPO will be used for various purposes, including establishing a new manufacturing facility, capital expenditure for existing operations, repaying debt, and general corporate purposes.
5. When will the shares of Gala Precision Engineering be listed on the stock exchanges?
The shares of Gala Precision Engineering are expected to be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on September 9, 2024, providing liquidity and flexibility for investors.
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