Carraro India IPO size slashed as owners unhappy with valuation

MUMBAI: Auto component maker India Carraro cuts IPO size by one-third $The company lost Rs 1,250 crore after its promoters were not satisfied with the valuation, the company’s banker told a news conference.

The company had previously planned to raise funds $1,812 crore through offer for sale (OFS).

“We as banks have recommended the minimum (offer) size. But at this valuation, the company does not want to sell that much and that is why they have cut OFS,” said Ashish Nigam, managing director of investment banking at Axis Capital, the bank leading the IPO.

at the upper end of the price band $The offer price is $704 per share and represents a price-to-earnings (P/E) multiple of 64 based on the company’s fiscal 2024 earnings. This compares to the average price-to-earnings ratio of peers mentioned in the company’s prospectus, which is 55.8. The company’s implied market cap is capped at $4,002 crore.

lower than expected

Vice Chairman and Promoter Tomaso Carraro said that while the company’s valuation may not be as high as its Italian owners expected, it is still higher than other markets, providing a window for the company to list in India. reason.

“Valuations in India are very attractive compared to valuations elsewhere,” he told a news conference.

He added that high valuation was not the only reason for the company to list in India.

“We are doing the IPO because we think India is a huge opportunity for us. More importantly for Carraro, technology has changed dramatically,” Carraro said. He said demand for high-power four-wheel-drive tractors is increasing in India, which brings greater business opportunities for the company.

No major capital required

Bankers further said that the company currently does not require any major capital infusion, making it a pure OFS. Although Carraro India’s two manufacturing sites in Pune are operating at more than 80% capacity utilization, it does not need to expand capacity immediately and once it is expanded, it will be done through internal accruals, they said.

The company had $According to its prospectus, cash and cash equivalents stood at Rs 970 million at the end of September 2024.

Carraro India is primarily involved in the four-wheel drive tractor segment. It does not exist in the two-wheel drive tractor segment which currently accounts for a majority of the Indian market.

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The company sells transmission systems that account for a quarter of a tractor’s cost, said Balaji Gopalan, the company’s managing director. Carraro India’s customers include tractor market leaders Mahindra & Mahindra as well as Tafe and Sonalika.

“So we’re critical to OEMs,” he said.

Carraro India is owned by Carraro International SE. The company is selling a high-end 31.23% stake to raise funds $12.5 billion rupees. The issuance opened for subscription on December 20 and closed on December 24. The shares are expected to list on the exchange on December 30 or 31.