Carraro India Ltd, a leading manufacturer of transmission systems for off-highway vehicles, agricultural equipment, and construction machinery, has announced the price band for its much-anticipated Initial Public Offering (IPO). The issue, valued at Rs 1,250 crore, is set to open for subscription on December 20 and will close on December 24, with anchor bidding scheduled for December 19. This IPO is entirely an Offer for Sale (OFS) by its parent entity, Carraro International S E, meaning all proceeds will go to the selling shareholder.

Key Details of the IPO

IPO Price Band: Rs 668-774 per share.
Offer Structure: The entire IPO is an Offer for Sale (OFS), with no fresh issue of shares. All proceeds will go to Carraro International S E.
Subscription Dates: Open from December 20 to December 24, with anchor bidding on December 19.
Allocation:
50% for Qualified Institutional Buyers (QIBs).
35% for Retail Investors.
15% for Non-Institutional Investors.
Book Running Lead Managers: Axis Capital Ltd, BNP Paribas, and Nuvama Wealth Management Ltd.

About Carraro India: A Legacy in Precision Engineering

Established in 1997, Carraro India Ltd is a subsidiary of the global entity Carraro S.p.A. It began manufacturing transmission systems in 1999 and expanded into axles by 2000. The company operates as an independent tier-1 supplier, focusing on providing axles and transmission systems for agricultural tractors and construction vehicles.

State-of-the-Art Manufacturing Facilities

Carraro India operates two advanced manufacturing plants in Pune, specializing in:

Drivelines.
Gears.
These plants feature cutting-edge capabilities, including:

Casting and machining.
Prototyping and testing.
Heat treatment, assembly, and painting.

Global Reach and Prominent Clients

As of September 2024, Carraro India supplied products to 38 manufacturers in India and six international clients. Key clients include major OEMs (Original Equipment Manufacturers) in both the agricultural and construction sectors:

Agricultural Tractor Clients: CNH, TAFE, Mahindra and Mahindra, John Deere India Pvt Ltd, Escorts Kubota, Action Construction Ltd, and International Tractors Ltd.
Construction Vehicle Clients: CNH, Bull Machines, Liugong, Manitou Equipment, Doosan, Escorts Kubota, and Mahindra and Mahindra.
The company exports directly to customers in Asia and indirectly to clients outside Asia through Carraro Drive Tech Italia S.p.A.

Financial Performance: Steady Growth Amid Industry Demand

Carraro India has showcased robust financial growth in recent years:

Revenue from Operations: Increased by 4.44% to Rs 1,770.45 crore in FY24, compared to Rs 1,695.12 crore in FY23.
Profit After Tax (PAT): Rose by 29.44% to Rs 60.58 crore in FY24 from Rs 46.80 crore in FY23.
This consistent growth underscores the company’s strong demand and efficient operations.

IPO Outlook and Investor Considerations

The Carraro India IPO offers an opportunity to invest in a leading player in the precision engineering sector. Here are some key considerations for investors:

Growth Drivers

Strong Client Base: A diversified portfolio of clients in both domestic and international markets ensures stability.
Robust Operations: Advanced manufacturing facilities and backward integration position the company for future growth.
Market Leadership: Carraro India’s expertise in axles and transmission systems makes it a preferred supplier for industry giants.

Risks and Challenges

OFS Structure: As this IPO is fully an OFS, proceeds will not directly contribute to business expansion.
Competitive Landscape: The company operates in a highly competitive sector with established players.

Actionable Insights for Investors

For potential investors, the Carraro India IPO represents an opportunity to gain exposure to a niche, high-demand segment of the engineering sector. Retail and institutional investors alike may find value in the company’s stable revenue growth and strong client partnerships.

Investment Strategy

Long-Term Growth Potential: The company’s consistent financial performance and operational excellence suggest promising long-term growth.
Price Band Consideration: The IPO price band of Rs 668-774 reflects its premium positioning in the market. Conservative investors may prefer entering near the lower band.

Conclusion

Carraro India’s IPO is poised to attract significant attention from institutional and retail investors, given its strong market position and consistent financial growth. The focus on axles and transmission systems for tractors and construction vehicles underscores its niche expertise, making it an attractive proposition for those looking to diversify their portfolio.