Sansera Engineering Limited (Sansera) manufactures and supplies diverse range of precision forged and machined components that critical for engine, transmission, suspension, braking, chassis, and other systems for the two-wheeler (2Ws), passenger vehicle (PVs) and commercial vehicle (CV) vertical. They also supply components to the aerospace sector and for off-road vehicles. In India, it has nine out of the top 10 2W OEMs and the leading PV OEM as customer. Globally, it supplies to six out of top 10 global Light Vehicle OEMs and three of the top 10 MHCV OEMs. Its diversified product/geographic/customer exposure, growing product families (69 in FY21 vs. 51 in FY19) and growing customer base (71 in FY21 vs. 64 in FY19) have aided market share and wallet share gains. 2W, PVs and CVs accounted for ~50%, 24% and 13% of FY21 revenue from products respectively.
- A leading supplier of complex and high-quality precision engineered components that is gaining market share across automotive and non-automotive sectors.
- Well diversified business model.
- Advanced capabilities in design and engineering, machine building and automation resulting in continuous new product development.
- Long-standing relationships with well-known Indian and global OEM customers.
- Lack of firm commitment long-term supply agreements with customers
- Dependence on the sale of products to certain key customers
- Seasonal or economic cyclicality and failure to adapt to industry trends and evolving technologies
- Continuing impact of the COVID-19.
Outlook & Valuation:
Despite ~13% annual production decline in 2Ws and PVs in India and ~20% annual decline in Global Light Vehicle production during FY19- 21, Sansera’s revenue only declined by 10% YoY in FY20 and grew by 6% YoY in FY21. Its higher than industry growth rate has been on account of focus on other verticals, new product development and new customer additions. Recovery in Indian and Global production volumes along with benefits from vendor consolidation are likely to drive revenue growth going ahead. Moreover, its longstanding relationships of ~20+ years with the 2nd and 3rd largest Indian 2W OEM and 34 years with largest Indian PV OEM highlight its credentials. At `744, FY21 P/E of 35x appears reasonable given the expected improvement in earnings CAGR over FY21-23 and hence we recommend “SUBSCRIBE” on the issue.
- Issue Open: Sep 14, 2021 and Close: Sep 16, 2021
- Face Value: 2 Present Eq.
- Paid up Capital: Rs 9.4 cr
- Offer for Sale: Rs 1,283 Cr
- Post Eq. Paid up Capital: Rs 9.4cr
- Issue size (amount): Rs 1,283 cr
- Price Band: Rs 734-744
- Lot Size: 20 shares and in multiple thereafter
- Post-issue mkt. cap: * Rs 3,771 cr – ** Rs 2,823 cr
- Promoters holding Pre-Issue: 43.91%
- Promoters holding Post-Issue: 36.56%
Sansera is an engineering-led integrated manufacturer of complex and critical precision engineered components across automotive and non-automotive sectors. Within the auto, they manufacture and supply a wide range of precision forged and machined components and assemblies, such as connecting rod, rocker arm, crankshaft, gear shifter fork, stem comp, and aluminum forged parts, which are critical for engine, transmission, suspension, braking, chassis, and other systems for the 2W, PV and CV verticals. Within the non-auto, they manufacture and supply a wide range of precision components for the aerospace, off-road, agriculture and other segments, incl. engineering and capital goods. For FY21, they derived ~88%, and ~12% of their revenue from sale of products from the automotive sector and non-automotive sectors, respectively. For FY21 they derived ~65% of their revenue from sale of products from India and ~35% from Europe, USA and other foreign countries combined. They are one of the top 10 global suppliers of connecting rods within the Light Vehicle segment and one of the top 10 global suppliers of connecting rods within the CV segment (CY20). They have been gaining market share in connecting rods in terms of production volume (units) for (i) Light Vehicles with a global market share of 2.3% in CY20 vs. 0.9% in CY15 and (ii) CVs with a global share of 3% in CY20 vs. of 0.9% in CY15.