This follows a board approval received by the company last month to raise Rs 1,200 crore by issuing fresh shares
25 Sep 2024 | 7091 Views | By Ashutosh R Shyam
Sansera Engineering, a manufacturer of connecting rods for two-wheelers and steering parts for passenger cars, is planning to raise ₹1,000-1,200 crore through qualified institutional buyers (QIBs), according to multiple sources familiar with the matter.
The company had, a month ago, announced that it had received permission from its board ...
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Sansera Engineering, a manufacturer of connecting rods for two-wheelers and steering parts for passenger cars, is planning to raise ₹1,000-1,200 crore through qualified institutional buyers (QIBs), according to multiple sources familiar with the matter.
The company had, a month ago, announced that it had received permission from its board of directors to raise ₹1,200 crore by issuing fresh shares to qualified investors. The board had also authorised the management to increase the company’s share capital to 30.5 crore shares from the current limit of 23.0 crore shares.
Autocar Professional has learned that Sansera Engineering has appointed ICICI Securities to facilitate the fundraising, and rounds of roadshows to meet institutional investors have already begun. Sansera was valued at ₹3,800 crore at the time of the IPO. Its value has risen to around ₹9,300 crore at present in sync with the appreciation in the value of its shares.
The Bengaluru-based company, which supplies to automakers like Maruti Suzuki and Bajaj Auto, was listed on the stock exchanges in September 2021 and raised ₹1,283 crore through its initial public offering (IPO). This will be the first time the company has sought equity funding since its IPO.
A source close to the development indicated that the QIB issue may open soon.
The source indicated that the issue has met with an encouraging response, particularly from investors looking to diversify their equity exposure from companies that are focused on the traditional, internal combustion engine-based technologies to those that operate in non-automotive sectors, particularly precision components for defense companies.
Sansera has an order book of ₹1,685 crore, which has nearly doubled over the past two fiscal years. The company derives approximately 76% of its revenue from the automotive internal combustion engine (ICE) segment, 12% from the tech-agnostic/EV segment, and the remainder from non-auto segments. In terms of vehicle contributions, two-wheelers account for 42% of revenue, passenger cars 23%, commercial vehicles 10%, and the rest from tech-agnostic and non-auto segments. Regarding products, connecting rods are the largest revenue contributor, followed by crankshafts at 17%, rocker arms at 15%, gear shifter forks at 5%, and other components making up the balance.
An email sent to Sansera Engineering is yet to elicit any response.
At the current market price of ₹1,700 per share, the company will have to dilute around 13-15% of its equity to raise the desired funds. According to BSE filings, the promoter held 34.78% of the company's stake at the end of June 2024.
At the end of the first quarter of the current fiscal year, mutual funds, insurance companies, and foreign portfolio investors held 23.8%, 9.34%, and 15.22% of the company's stakes, respectively.
The company’s revenue grew by 19% annually to ₹2,811 crore between FY22 and FY24, while profit also expanded at the same rate, reaching ₹187.5 crore during the same period.
Sansera is India’s largest connecting rods manufacturer and ranks among the top 10 globally. As automakers shift from outsourcing to in-house manufacturing, particularly for ICE engines, the company has benefited from new orders from global customers.
The growing sales of higher-displacement two-wheelers, outpacing those of lower-displacement models, are expected to enhance the company’s earnings growth through improved content per vehicle, especially as they use fractured split connecting rods. This trend positions Sansera well as it supplies customers such as Royal Enfield, Bajaj, Triumph, and Hero Harley.
On the passenger vehicle side, the company’s expertise in aluminum forging is advantageous due to the increasing use of aluminum in gear shifter forks, driven by automakers’ emphasis on lightweight vehicles.
In the non-auto sector, Sansera aims to gradually transition to supplying critical and complex precision components for actuation systems and landing gear systems in aerospace, already supplying companies like Raytheon, Saab, and Triumph Group.
The company is consolidating and strengthening its market share in the automotive ICE space while expanding its product range in the tech-agnostic segment, which began with braking and assembly parts in 2021 and now includes aluminum forging components. In FY23 and FY24, Sansera spent ₹341 crore on capital expenditure, allocating 66% for plant and equipment, 18% for facility expansion, and 16% for maintenance.
The company plans to expand its capacity and is committed to investing ₹2,100 crore over the next 3-5 years, focusing on significantly enhancing its export capabilities. Currently, exports account for one-third of the company’s total revenue. Sansera will invest in technologies that promote lightweight and aluminum-forged components, further increasing its content per vehicle.