Carraro India Ltd, a prominent player in the manufacturing of axles, transmission systems, and gears for agricultural and construction vehicles, is set to launch its IPO. Established in 1997, the company has grown to become a key supplier to both Indian and international Original Equipment Manufacturers (OEMs). With two advanced manufacturing plants in Pune, Maharashtra, Carraro India specializes in high-precision engineering products, serving industries ranging from agriculture to automotive.
The upcoming IPO aims to offer investors an opportunity to participate in a company with a steady growth trajectory, supported by a strong product portfolio and a broad client base. However, the company also faces several risks, including its reliance on a few key customers, concentration of operations in one geographical region, and exposure to market fluctuations in the agriculture and construction vehicle sectors.
This review delves into the key details of the Carraro India IPO, examining its business strengths, potential risks, and the overall market outlook, helping investors make an informed decision on whether to apply for the IPO.
Carraro India IPO Details
| Bidding Dates | Min. Investment | Lot Size | Price Range |
|---|---|---|---|
| 20 Dec ‘24 – 24 Dec ‘24 | ₹14,028 | 21 | ₹668 – ₹704 |
Issue Size: ₹1250.00 Cr
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About Carraro India
Carraro India Ltd is a leading supplier of engineering products, primarily manufacturing axles and transmission systems for agricultural tractors and construction vehicles like backhoe loaders, soil compactors, and small motor graders. The company also produces gears, shafts, and related components for industrial and automotive applications. Carraro India provides solutions that include in-house product design, manufacturing, and supply of critical components for off-highway vehicles.
- Founded: 1997
- Managing Director: Mr. Balaji Gopalan
- Parent Organization: Carraro India Ltd
Strengths
- Advanced Manufacturing Facilities: The company operates two plants in Pune, Maharashtra, equipped for high-quality manufacturing, including machining, assembly, and testing of driveline and gear systems.
- Certifications:
- Gear manufacturing plant holds the IATF 16949:2016 certification for quality management and ISO 9001:2015 certification.
- Driveline plant is ISO 9001:2015 and ISO 14001:2015 certified.
- Client Base: Carraro India supplies products to 38 manufacturers across India and international markets, with exports facilitated through Carraro Drive Tech Italia S.p.A.
- Strong Financial Performance: The company has seen consistent growth in both revenue and profit, with revenue increasing from ₹1,497.54 crore in FY22 to ₹1,788.96 crore in FY24. Similarly, PAT grew from ₹22.43 crore in FY22 to ₹62.56 crore in FY24.
Risks
- Dependence on Top Customers: A significant portion of the company’s revenue comes from its top 10 customers, contributing around 85-88% of total revenue. Losing these clients could severely affect the company’s performance.
- Reliance on Carraro Group: The company depends on Carraro Group for sourcing customers, procurement, and general operational support. Any disruption in this relationship could affect its operations.
- Geographical Concentration: Carraro India’s manufacturing is concentrated in Pune, Maharashtra, and any local disruptions, such as labor issues or natural disasters, could impact production.
- Market Dependency: The company’s performance is closely linked to the agricultural and construction vehicle markets. Any adverse changes in these industries could affect business operations.
- Contingent Liabilities: The company has contingent liabilities amounting to ₹231.07 crore, which could impact financial stability if they materialize.
- Legal Proceedings: Ongoing legal cases involving the company and its promoters may lead to adverse outcomes, affecting business prospects.
- Debt: As of October 31, 2024, Carraro India had borrowings totaling ₹209.19 crore, which may affect liquidity and financial health if not managed properly.
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Products
Carraro India manufactures a wide range of products, including:
- Agricultural Tractors: Axles and transmission systems for agricultural tractors, customized for various technical specifications.
- Construction Vehicles: Gears and transmission systems for equipment like backhoe loaders, compact wheel loaders, telehandlers, and more.
- Others: Gears, shafts, and ring gears for industrial and automotive applications.
Objects of the Issue
The company will not receive any proceeds from the IPO; all proceeds will be received by the Promoter Selling Shareholder after deducting related expenses and taxes.
Carraro India IPO Review by Dilip Davda
Recommendation: May Apply
Carraro India has a strong niche in the agricultural and construction vehicle sectors. With steady growth in revenue and profits, the IPO is priced aggressively but offers potential for long-term growth. Investors with a moderate risk appetite may consider applying for the IPO.
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Carraro India IPO Recommendations
| Reviewer | Recommendation |
|---|---|
| Anand Rathi | May Apply |
| Axis Capital | Neutral |
| Canara Bank Securities Ltd | Subscribe |
| Capital Market | Neutral |
| Dilip Davda | May Apply |
| Indsec Securities | Subscribe |
| SBICAP Securities Ltd | May Apply |
| Ventura Securities Ltd | Subscribe |
Summary: Out of 9 analysts, 3 recommend “Subscribe,” 4 suggest “May Apply,” and none advise avoiding the IPO.
Carraro India IPO Registrar
Link Intime India Private Ltd
- Phone: +91-22-4918 6270
- Email: carraro.ipo@linkintime.co.in
- Website: linkintime.co.in
Steps to Apply in Carraro India IPO via Zerodha
- Visit the Zerodha website and login to Console.
- Go to Portfolio and click the IPOs link.
- Click the ‘Bid’ button for Carraro India IPO.
- Enter your UPI ID, Quantity, and Price.
- Submit the IPO application.
- Approve the mandate via your UPI app (net banking or BHIM).
Conclusion
Carraro India Ltd offers a promising investment opportunity, driven by its strong presence in the agricultural and construction vehicle sectors, along with its advanced manufacturing capabilities. The company’s steady growth in revenue and profit, along with its strategic alliances and strong customer base, adds to its appeal. However, potential investors should be mindful of the risks, such as dependence on key customers and a concentrated operational base.
The IPO is priced aggressively based on recent earnings, and while some financial analysts recommend a “May Apply” approach, others see it as a long-term investment opportunity. Given the niche nature of Carraro India’s business and its steady performance, informed investors may consider a moderate investment for long-term growth.