Should you subscribe to Harsha Engineers IPO? Here’s what analysts say


Harsha Engineers International’s (HEI) initial public offer will open for subscription on Wednesday, September 14, and close on September 16. The price band is fixed at Rs 314-330.

The company, which supplies bearing cages, plans to raise Rs 455 crore through a fresh issue of shares, and Rs 300 crore via an offer-for-sale.

HEI operates under two segments– engineering business wherein it makes bearing cages (in brass, steel, and polyamide materials), complex and specialized precision stamped components, brass castings, etc.

The other division is the solar EPC business, under which it provides comprehensive turnkey solutions to all solar photovoltaic requirements.

Its products have wide applications in end-user industries such as automotive, railways, aviation & aerospace, construction, mining, agriculture, electronics, and renewables.

The company commands a 50-60 per cent market share in the organized domestic bearing cages market, while it holds a 6.5 per cent share in the global organized outsourced market, meeting 75 per cent of the global demand.

Its exports make up nearly two-thirds of its revenue, and it supplies its products to customers in over 25 countries across North America, Europe, Asia, South America, and Africa.

Key risks: Depends on limited numbers of customers for revenue. High exposure to foreign currency exchange rate fluctuations. Recent corporate reorganization may lead to administrative and operational difficulties.

Here is what brokerages say about the company:


HEI has recently diversified into production of bronze bushings, sand casting and specialized stamped components to cater to end-user industries like wind, mining and shipping. It plans to scale up this low volume, high value segment over the next 3-5 years. Besides, it is well placed to capture the growing bearing cage demand across industries.

Its increasing focus on other specialized precision components and on the growing EV segment could boost its EBITDA margins. Given growth recovery in auto/auto ancillary and strong momentum in the midcaps, we expect the IPO to do well.

Swastika Investmart | SUBSCRIBE

The company has managed to garner a lion-sized share in the Indian bearing cages market due to its first mover advantage as it was the first player to persuade bearing players to outsource the cage manufacturing than producing it in-house.

The government’s thrust on infrastructure, agriculture reforms, the revival of private capex, and rising housing & real estate demand augurs well for the company’s prospects.

It is a proxy play on India becoming a global manufacturing hub theme, and considering the positive growth outlook, experienced management, and competitive advantages, we have assigned a ‘subscribe’ rating to the issue.

LKP Securities | SUBSCRIBE

HEI has established a strong relationship with its customers who are leading global bearing makers across sectors. The bearing cages market globally is concentrated with top-6 players commanding a 54 per cent market share in FY22. As of March 31, HEIL supplied to each of these six companies. The company’s top 10 customers have contributed 45-48 per cent to its total revenues over the last 3 financial years. It also enjoys a long-term relationship with its clients.

At the upper end of the price band of Rs 330, it is valued at 27.7x FY22 earnings, which is reasonable compared to its peers.


The company has expertise in tooling, design development, and automation and has strategically located domestic and international production facilities and warehouses.

Of its 4 manufacturing facilities, two are at Changodar, and Moraiya (near Ahmedabad in Gujarat), and one each at Changshu, China, and Ghimbav Brasov in Romania.

Its consolidated PAT has grown at a CAGR of 105 per cent over FY20-22 on the back of margin expansion. Its diverse product portfolio and strong expertise are yet to be factored in the valuations.

Religare Broking | NEUTRAL

The brokerage expects the company to benefit from an increase in outsourcing for bearing cages by global companies. It estimates the global market to grow at a CAGR of 6-8 per cent over 2021-2029. Moreover, the firm has plans to enhance its market leadership in the bearings segment as well as capture opportunities in auto-EV segment, which has a good scope for growth.


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