Is Gala Precision IPO Good or Bad - Detailed Analysis

Gala Precision Engineering is kicking off its initial public offering which will be open from September 02, 2024, to September 04, 2024. While considering applying for this IPO, certain questions may arise in your mind, some of which include whether the Gala Precision IPO is good or bad, whether it is worth investing in Gala Precision Engineering, and so on. This article will cover a few details about Gala Precision Engineering to better analyze its IPO.

Gala Precision IPO - Company Overview

Gala Precision Engineering Limited, established in February 2009, specializes in manufacturing precision components, including disc and strip springs (DSS), coil and spiral springs (CSS), and special fastening solutions (SFS). These products are supplied primarily to original equipment manufacturers (OEMs) and are utilized across various sectors such as electrical, off-highway equipment, infrastructure, general engineering, and mobility segments including automotive and railways.

The company plays a vital role in the global supply chain, providing technical springs and high-tensile fasteners to customers in numerous countries, including Germany, Denmark, China, Italy, Brazil, the USA, Sweden, and Switzerland. 

Its operations are divided into two main divisions: the Springs Technology Division, which produces DSS, Wedge Lock Washers (WLW), and CSS, and the SFS division, which manufactures anchor bolts, studs, and nuts.

With more than 175 customers in over 25 countries as of March 30, 2024, Gala Precision has a significant global footprint. The company operates two manufacturing facilities located in Wada District, Palghar, Maharashtra, and is expanding with a new facility in Vallam-Vadagal, SIPCOT, Sriperumbudur, Tamil Nadu. This new facility is dedicated to developing high-tensile fasteners and expanding the product portfolio with new offerings like bolts.

As of June 30, 2024, Gala Precision employs a total of 294 permanent employees and 390 contract workers. The permanent workforce comprises 182 manufacturing workers, 19 logistics and store employees, 19 quality assurance personnel, 14 tool room development and maintenance staff, and 22 human resources and administrative employees.

Gala Precision IPO - Revenue Breakup

Segment-wise Revenue Breakup

*figures in Rs. crores

Gala Precision's Springs Technology division is clearly the main driver of the company's revenue, accounting for over 80% in Fiscal 2024. Fastening Solutions is also making progress, while Surface Engineering has experienced a slight decline. Overall, the company's revenue is steadily increasing, with Springs Technology taking the lead.

Geography-wise Revenue Breakup

Gala Precision’s revenue predominantly comes from India, contributing around 62-63% of total revenue over the past three fiscal years. The remaining 37-38% consistently comes from international markets. This stable split indicates the company’s strong presence in the domestic market while maintaining a significant global footprint.

Gala Precision IPO - Financial Overview

If we take a look at the financials of Gala Precision Engineering Limited, we can see that the company’s revenue from operations has shown an increase from Rs. 145.28 crores in FY22 to Rs. 202.55 crores in FY24. Similarly, its profits have also increased from Rs.6.63 crores in FY22 to Rs.24.3 crores in FY24 for which the PAT margins were reported at 11.89%.

Furthermore, the company has reported an ROCE and RoNW of 21.15% and 23.27%, respectively, which suggests that the company is utilizing its resources efficiently.

However, the cash conversion cycle for FY24 stood at 151 days, indicating that the company might be taking a bit longer to convert its investments in inventory and other resources into cash flows. 

Gala Precision IPO - Industry Overview 

The global DSS (Disc & Strip Springs) & WLW (Wedge Lock Washers )  market, during FY23, was valued at 891 million dollars and is expected to grow 6.1% through 2026. In India, this market is expected to grow at a slightly higher CAGR of 6.6% from FY24 to FY27, reaching around 115 million dollars in FY24. 

Key drivers for the growth include the industrial sector, particularly heavy machinery for manufacturing and infrastructure, and the mobility sector, with rising demand for automobiles and railways. The renewable energy sector also contributes to growth, driven by government climate policies. 

Additionally, the Coil & Spiral Springs (CSS) market in India was valued at 459 million dollars in FY24 and is expected to grow at a CAGR of 9.8%, fueled by the increasing adoption of electric vehicles and government initiatives to boost industrial participation.

Gala Precision IPO - Peer Comparison

The table gives you a comparison of Gala Precision with its listed competitors as of FY24:

As you can see from the above table, Gala Precision Engineering, is the smallest among its listed in terms of revenue and profits. However, the company has better margins compared to its competitors and a return on net worth of 23.27% which is the highest on the list. This indicates a greater efficiency of the company compared to its competitors.

Gala Precision IPO Details

Gala Precision IPO Date

The IPO of Gala Precision Engineering is open to subscription from September 02, 2024, to September 04, 2024. The shares will be allocated to investors on September 05, 2024, and the company will be listed in the NSE and BSE on September 09, 2024

Gala Precision IPO Issue Price

Gala Precision Engineering is offering its shares in the price band of Rs.503 to Rs.529 apiece. This means you would require an investment of Rs.14,812 per lot (33 shares) if you are bidding for the IPO at the upper price band.

Gala Precision IPO Size

The company is offering a total of 3,174,416 shares, amounting to Rs.167.93 Crores. Out of these, 2,558,416 shares worth Rs.135.34 Crores are offered through a fresh issue, and 616,000 shares worth Rs.32.59 Crores are offered through an offer for sale.

Gala Precision IPO Application Link

Gala Precision's IPO is now open for applications, allowing investors to participate in their growth. If you're interested, click below to apply

Apply for Gala Precision IPO

Is Gala Precision IPO a Good or Bad Investment? Final Thoughts

Gala Precision Engineering’s IPO presents a compelling investment opportunity for those looking to invest in a growing company with strong profit margins and efficient resource utilization. The company’s strategic focus on high-margin products, its solid domestic market presence, and its favorable industry outlook make it an attractive option. However, investors should consider the company’s cash conversion cycle and the inherent risks of investing in a smaller player in a competitive market. 

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