Belrise Industries IPO — Price Band, Investment Rationale, Financials, Key Risks And More: ICICI Direct

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ICICI Direct Report

Belrise Industries Ltd. will launch its initial public offering on May 21 and the offer closes for subscription on May 23. An automotive component manufacturing company has fixed the price band in the range of Rs 85-90 Apiece. The minimum order bid lot is 166.

The Rs 2,150 crore IPO comprises only of fresh issue with no component of offer-for-sale.

Objects of the issue

The issue is a fresh issue wherein net proceeds from fresh issue will be utilize towards repayment of debt (Rs 1,618 crore) and general corporate purposes.

Our view and rating

Belrise has grown healthy double digit in the past and with introduction of new products aims for similar growth trajectory going forward as well. With bulk of exposure to two-wheeler space, near term prospects at Belrise also look promising coupled with its premiumisation led content/vehicle increase play

With Rs 1,618 crore debt repayment on anvil from IPO proceeds, resulting in imminent annual interest costs savings of ~Rs 150 crore and consequent PAT gain of ~Rs 110 crore coupled with organic growth prospects, Belrise is well poised to clock ~Rs 500 crore of PAT in FY27E which makes it a lucrative offering at 16x P/E on FY27E vs. ~20x PE being commanded by domestic ancillary players.

Henceforth, we assign an Subscribe rating on Belrise Industries. Healthy double digit returns ratios and margin profile also provide good margin of safety to our investment thesis.

Key risk & concerns

• Customer concentration risk, top 10 clients account for 63.8% of sales

• ~20% of topline is pure ICE components (exhaust), susceptible to EV risk.

• Exposure to cyclicality in the automotive sector.

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