Incorporated in 1976, Tega Industries (Tega) manufactures components of mining equipment. These components are used across different stages of mineral ore processing.
Tega has six manufacturing sites: three in India and the other three strategically located in Chile, South Africa, and Australia.
Offer details
- Start date: 1 December 2021
- End date: 3 December 2021
- Price band: ₹443–₹453 per share
- Minimum investment: ₹14,949
- IPO size: ₹619 crore
Business highlights
- Globally, Tega is the second-largest producer of polymer-based mill liners. It’s global market share rose from 3% in 2018 to 5% in 2020.
- Apart from mill liners, it also makes other components such as conveyor belts, pump parts and chutes used in mineral ore processing.
- As on June ‘21, its order book stood at ₹316 crore, which is about 40% of its FY21 revenue.
Financials
Revenue: 13%; Net profit: 103% (FY19-21 CAGR)
Strengths
- High repeat revenue of about 75% due to replacement demand.
- 60% of revenue comes from gold and copper ore processing sites.
- These metals have different demand cycles and hence provide stability to the revenue.
- High client diversification with top 10 customers accounting for less than 30% of total revenue.
- Tega is one of the most efficient players globally with operating margins of around 28% and return on capital employed of about 24% in FY21.
Risks
- Business presence in over 70 countries exposes it to currency fluctuations and geo-political risks.
- Failure to manage its vast production and distribution network could hamper business growth.
- Loss of a long-term marquee customer(s) may result in loss of business in an industry, which has high entry barriers.
Opportunities
- Gold and copper ore processing is expected to grow at 6% CAGR to $3 billion over the next 10 years.
- Strategically located manufacturing sites are positioned in key mining belts to leverage the growth of its clients.
- Interestingly, declining grades of copper ore require more processing material. This is expected to boost demand for Tega’s products.