Gala Precision IPO - Investment Rationale, Issue Details, Financials, Peer Comparison, Risks: Anand Rathi

Anand Rathi Report

Gala Precision Engineering Ltd. will launch its initial public offering on Sept. 02 and the offer will close on Sep. 04. The precision component manufacturer has fixed a price band in the range of Rs 503–529 per share with a face value of Rs 10 each for the issue. The minimum lot size for retail investors is 28 shares.

The Rs 167.93 crore IPO comprises of a fresh issue of Rs 135.34 crore and an offer-for-sale of Rs 32.59 crore.

Objects of the fresh Issue

• Setting up a new facility at Vallam-Vadagal, SIPCOT, Sriperumbuddur, Tamil Nadu for manufacturing high tensile fasteners and hex bolts.

• Funding capital expenditure requirements towards purchase of equipment, plants and machinery at Wada, Palghar, Maharashtra.

• Repayment/prepayment, of certain borrowings availed by the company.

• General corporate purposes.

Valuation and outlook

Gala Precision Engineering Ltd. are a well-established manufacturer specializing in precision engineering components, offering a broad and varied product portfolio across multiple markets. They have built enduring relationships with their customers.

They plan to further develop their expertise in the key sectors of renewable energy, industrial, and mobility by continuously reinforcing their core strengths in precision engineering for sustainability. They have expanded their range of fastening solutions for the wind segment, developing high-tensile fasteners as an import substitute for leading global wind turbine manufacturers in India.

This expansion has increased their market share by broadening their product range and adding more OEMs, including those for export. The company's P/E ratio is 30.0 times based on its FY24 earnings, with a market capitalization of Rs 6,702 million after the issuance of equity shares and a market cap-to-sales ratio of 3.3 times its FY24 earnings.

We believe that the issue is fairly priced, therefore we recommend “Subscribe – Long Term” rating to the IPO.

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