IPO Review - Sansera Engineering Ltd - ICICI Direct

Sansera Engineering (SEL), incorporated in 1981, is an engineering-led integrated manufacturer of complex & critical precision engineered components for automotive (2-W, PV, CV) & non-automotive (aerospace, off-road, agriculture, etc.) sectors. Its automotive product range includes connecting rod, rocker arm, crankshaft, gear shifter fork and stem comp among others. SEL has 16 manufacturing facilities (15 - India, 1 - Sweden).

Investment Rationale

Leading precision engineered component supplier

SEL has a track record of developing complex and critical precision engineered components for the automotive sector over multiple decades while its capabilities now extend to several non-automotive sectors. Precision components such as connecting rods, crankshafts & rocker arms are manufactured using complex engineering processes and require a high level of precision and adherence to high standards of quality given their criticality to automotive systems. The company is among top 10 global suppliers of connecting rods for light vehicles (2.3% CY20 global market share, up from 0.9% in CY15) and CVs (3% CY20 global market share vs. 0.9% in CY15). In India, it is the largest supplier of connecting rods, rocker arms and gear shifter forks to 2-W OEMs and the largest supplier of connecting rods and rocker arms to PV OEMs. Going forward, SEL believes it will benefit from the trend of OEMs (a) increasingly outsourcing not just forged precision components but the entire forging and machining operations of these components as well as (b) consolidating their suppliers.

Diversified business model

In terms of user industries, automotive and non-automotive accounted for ~88.5%, 11.5% of SEL's FY21 revenues, respectively. Within automotive, 2-W contributed ~50%, with PV, CV contributing ~24%, ~13%, respectively. SEL derived ~65% of FY21 revenues from India and the rest from Europe, US and others. The company's clientele includes nine of the top 10 Indian 2-W OEMs, India's leading PV OEM, six of the global top 10 light vehicle makers and three of the global top 10 M&HCV OEMs. Top five clients comprised 59% of revenues in FY21. SEL's three chief products, connecting rods, rocker arms and crank shaft assemblies, accounted for ~39.7%, ~19.5% and ~17.2% of sales, respectively, in the past year.

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Source : Equity Bulls

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