Happy Forgings Ltd

About the Company:

Happy Forgings Ltd is the fourth largest engineering led manufacturer of complex and safety critical, heavy forged and high precision machined components in India as of Fiscal 2023 in terms of forgings capacity.

Company manufactures a wide range of heavy forged and machined products which include crankshafts, front axle beams, steering knuckles, differential cases, transmission parts, pinion shafts, suspension products and valve bodies across industries for a diversified base of customers.

Company primarily caters to domestic and global original equipment manufacturers (“OEMs”) manufacturing commercial vehicles in the automotive sector.

In the non-automotive sector, company caters to manufacturers of farm equipment, off-highway vehicles and manufacturers of industrial equipment and machinery for oil and gas, power generation, railways and wind turbine industries.

Company has over 40 years of experience of manufacturing and supplying quality and complex components according to customers specifications.

Company has emerged as a leading player in the domestic crankshaft manufacturing industry with the second largest production capacity for commercial vehicle and high horse-power industrial crankshafts in India.

Company’s focus is on producing margin accretive value-added products has led company’s transition from being a forging led business to a machined components manufacturer.

Company’s Client List includes:

Ashok Leyland Ltd
JCB India Ltd
Mahindra & Mahindra Ltd
Tata Cummins Private Ltd
Swaraj Engines Limited

Company’s End User Sectors:

Company’s Relationship with Customers:

Company has, through over 40 years of business operations, established long-standing relationships with several Indian and global customers across industries.

Company is among the few companies in India that manufacture and supply high precision safety critical components to leading OEMs including manufacturers of commercial vehicles, farm equipment, off-highway vehicles and industrial equipment and machinery for oil and gas, power generation, railways and wind turbine industries.

Company has a diversified customer base and have served 66 customers in Fiscal 2023.

Company’s Exports:

Company exports to customers across nine countries including Brazil, Italy, Japan, Spain, Sweden, Thailand, Turkey, the United Kingdom and the United States of America.

Company’s Manufacturing Facilities:

Company owns and operates three manufacturing facilities, of which two are located at Kanganwal in Ludhiana, Punjab and one is located at Dugri in Ludhiana, Punjab.

Company’s Installed capacity for forging and machining:

Company’s annual aggregate installed capacity for forging and machining has increased from 67,000.00 MT and 29,500.00 MT respectively, as of March 31 to 120,000.00 MT and 47,200.00 MT as of September 30, 2023, respectively.

Company’s Financial Parameters:

Company’s Revenue from sale of products to Automotive and Non-Automotive sectors:

Competitors in the Business:

Company’s peers are Bharat Forge, Sona BLW Precision Forgings, Uno Minda, CIE Automotive, Craftsman Automation, Ramkrishna Forgings, Sansera Engineering, MM Forgings, Endurance and Cummins India.

Management Team:

Mr. Paritosh Kumar (Designation: Chairman and Managing Director)
Mr. Ashish Garg (Designation: Managing Director)

Objectives of the Issue:

Offer For Sale: (Rs.608.59 cr)

Company will not receive any proceeds from the Offer for Sale by the Selling Shareholders. The respective portion of the proceeds from the Offer for Sale shall be received by the Selling Shareholders, after deducting their portion of the Offer related expenses.

Fresh Issue: (Rs.400 cr)

Purchase of equipment, plant and machinery.
Prepayment of all or a portion of certain outstanding borrowings availed by thempany.
General corporate purposes.

Proposed Schedule of Implementation and Deployment: (in millions)

Positives for the Company:

Focus on producing margin accretive value-added products.

Company’s focus is on producing margin accretive value-added products has led company’s transition from being a forging led business to a machined components manufacturer.
Company’s revenue from sale of machined products has increased from Rs.399.2 cr in Fiscal 2021 to Rs.839.2 cr in Fiscal 2023, at a CAGR of 44.99% which demonstrates company’s increased focus on machined products.
Company’s strength in machining and overall value addition to products has enabled to achieveing the highest EBITDA margin among peers.

Manufactures wide range of heavy forged and machined products.

Company manufactures a wide range of heavy forged and machined products which include crankshafts, front axle beams, steering knuckles, differential cases, transmission parts, pinion shafts, suspension products and valve bodies across industries for a diversified base of customers.
Company is among the few companies in India with the capability to manufacture and supply high precision safety critical components to leading OEMs including manufacturers of commercial vehicles, farm equipment, offhighway and industrial equipment and machinery for oil and gas, power generation, railways and wind turbine industries.

Entry barriers for new players to qualify as suppliers.

Company’s believes that the critical application of products, along with their heavy weight, closed tolerance and stringent quality requirements of OEMs serve as entry barriers for new players to qualify as suppliers .
Further, company believes that its focus on the high HP engine segment insulates company from any potential electric vehicle (“EV”) disruption as hydrogen, CNG and LNG combustion engine technologies are expected to become prominent alternate powertrain technologies in this segment and crankshaft as a product is compatible to such combustion engines with minimal or no alterations.

Amongst Top Forging Companies in India.

Company is continuously investing in machinery and equipment to expand our forging and machining capacity to seize opportunities for growth in the market.
As of March 31, 2023, company is only the second company in India to have a 14,000 tonne forging press or higher forging press and are among the four companies in India that possess a 8,000 tonne forging press or higher forging press allowing us to manufacture heavier and complex products with greater precision and accuracy, thereby better serving our customers.
Company is also among the few players in the Indian forging industry that have a forging capacity of about 107,000 MT as of March 31, 2023.

Heavier Forging Capacity allows company to cater to different Industries.

With the installation of new 14,000 tonne press enables company to forge heavier and safety critical parts up to 250 kilograms using the close die forging process, which expands company’s capabilities to cater to different industries.
Company believes that the upgrades undertaken in the manufacturing facilities, infrastructure, machines, equipment and technology have enabled it to offer a diverse products, reduce operating costs, drive productivity and will enable company to capitalise on future growth.

Foray into lightweight forging and machining with introduction of aluminium components.

The use of lightweight materials is a growing trend in various industries. The automotive industry, in particular, is driving this trend due to the increasing demand for fuel-efficient vehicles
By leveraging the existing capabilities, company intends to diversify the product portfolio by entering into the market of lightweight forging and machined components.
In particular, company plans to introduce aluminium forging and machined components to cater to the growing demand for lightweight materials in various industries such as automotive, aerospace, and defence.

Capitalise on increasing demand from international markets to grow exports.

There is significant opportunities for growth for Indian component manufacturers as key European suppliers of traditional critical engine parts are witnessing significant cost pressures due to a shift in business from internal combustion engines to electric vehicles.
The demand for ICE components are increasingly shifting to India as several tier one suppliers in developed regions like Europe and USA have discontinued investing in the ICE design and development due to the plan of the OEMs to transition towards EVs.
Company has recognized the immense opportunity presented by this rapidly evolving landscape and we are committed to leverage our engineering and machining strengths to tap into this opportunity.

Company is Expanding capacity at existing manufacturing facilities.

Company proposes to purchase new machineries and equipment to build up additional capacity for our forging and machining operations from the Net Offer Proceeds.
The installation of new machinery and equipment will enable company to increase the production capacity, scale of operations, onboard new customers, introduce new products, better serve existing customers and address the business requirements of large customers, further improve customer service and facilitate company’s growth strategy.
In addition, we are also in the process of commissioning a new 6,300 tonne forging press line, which is expected to be installed by June, 2024.

Grow inorganically through strategic acquisitions and alliances.

In terms of strategic acquisitions, company intends to explore and consider opportunities that can create synergies between the target companies to fuel company’s growth strategy.
Company plans to target entities that can expand opportunities in other end-markets, geographic regions, new customers and new products.

Financials of the Company:

(in Crores)	FY 21	FY 22	FY 23	Upto 30th Sept 23
Revenue	590.8	866.1	1202.2	675.7
Net Profit	86.4	142.2	208.7	119.2

Valuation of Peer Group Companies:

Company Name	Face Value	EPS	PE Ratio	RoNW	NAV
Happy Forgings Ltd	2	23.32	36.44	21.12%	110.43
Craftsman Automation Ltd	5	117.56	43.92	18.04%	651.68
Sona BLW Precision Forgings Ltd	10	6.75	85.56	17.26%	39.12

IPO Details:

Details	Info
Issue Opens on	19th December 2023
Issue Closes on	21st December 2023
Issue Price	Rs.808 – 850
Face Value	Rs.2
Retail Category Allocation	35%
Minimum Lot	17 Shares
Minimum Investment	Rs.14,450
Issue Constitutes	12.59%
Issue Size	Rs. 1008 cr ($121 million )
Market Cap	Rs.8007 cr ($964 million )
Listing at	NSE & BSE
Equity Shares Offered (Fresh)	47,05,882 (Rs.400 cr)
Equity Shares Offered (OFS)	71,59,920 (Rs.608.59 cr)
Total Equity Shares Offered (Fresh + OFS)	1,18,65,802 (Rs.1008.59 cr)
Equity Shares Prior to the Issue	8,94,99,000
Equity Shares after the Issue	9,42,04,882 (Rs.8007 cr)

Also Read : List of Upcoming IPO’s in India.

Important Dates:

Finalization of Basis of Allotment	on or Before 22nd December 2023
Initiation of Refunds	on or Before 26th December 2023
Credit of Equity Shares:	on or Before 26th December 2023
Listing Date:	on or Before 27th December 2023

IPO Valuation Parameters:

Earnings Per Share (EPS)	Price To Earnings ratio (PE)	Return on Net Worth (RoNW)	Net Asset Value (NAV)
23.32	36.44	21.12%	110.43

Company Contact Info:
Happy Forgings Limited B XXIX, 2254/1 Kanganwal Road P.O. Jugiana Ludhiana – 141 120 Punjab, India Telephone: +91 161 5217162 Email: complianceofficer@happyforgingsltd.co.in Website: www.happyforgingsltd.com

IPO Registrar Info:
Link Intime India Private Limited C-101, 1st Floor, 247 Park, Lal Bahadur Shastri Marg Vikhroli (West), Mumbai – 400 083 Maharashtra, India Telephone: + 91 810 811 4949 E-mail: happyforgings.ipo@linkintime.co.in Website: www.linkintime.co.in