Mangal Electrical IPO opens today: GMP up 4%; should you park your money?

Business Standard

2 days ago

Mangal Electrical IPO: The initial public offering (IPO) of transformer manufacturing company, Mangal Electrical Industries, is set to open for public subscription today, Wednesday, August 20. At the upper end, the company seeks to raise ₹400 crore from the public offering, which comprises an entirely fresh issue of equity shares.
Ahead of the opening of the public offering, Mangal Electrical successfully garnered ₹120 crore from anchor investors in a bidding that concluded on Tuesday, August 19. The anchor book saw participation from investors including Abakkus Diversified Alpha Funds, LC Pharos Multi Strategy Fund VCC, Societe Generale, Finavenue Capital Trust, Swyom India Alpha Fund, Sundaram Alternative Investment Trust, Imap India Capital Investment Trust, Sunrise Investment Trust, and Aarth AIF Growth Fund.
As the Mangal Electrical IPO opens for subscription, here are the key details of the public offering as outlined in its Red Herring Prospectus (RHP):
Mangal Electrical IPO structure
Mangal Electrical IPO is a book-built issue, comprising an entirely fresh issue of 7.1 million equity shares, with no offer for sale (OFS) component.
Mangal Electrical has reserved not more than 50 per cent of the net offer for qualified institutional buyers (QIBs), not less than 35 per cent for retail investors, and not less than 15 per cent for non-institutional investors (NIIs).
Mangal Electrical IPO price band, lot size
Mangal Electrical IPO is available at a price band of ₹533-561 per share, with a lot size of 26 shares. Thus, investors can bid for a minimum of 26 shares and in multiples thereof.
A retail investor would require a minimum of ₹14,586 to bid for one lot of Mangal Electrical IPO, and a maximum of 13 lots or 338 shares, with an investment amount of ₹1,89,618.
Mangal Electrical IPO grey market premium (GMP)
The unlisted shares of Mangal Electrical were commanding a decent premium in the grey market ahead of the opening of the public issue. Sources tracking unofficial market activities revealed that Mangal Electrical shares were seen trading at around ₹586 per share, reflecting a grey market premium (GMP) of ₹25 or 4.46 per cent over the upper end of the issue price.
Mangal Electrical IPO allotment date, listing date
The three-day subscription window to bid for the Mangal Electrical IPO is set to close on Friday, August 22. Following the closure of the subscription window, the basis of allotment of Mangal Electrical IPO shares is likely to be finalised on Monday, August 25. The successful allottees will receive the company's shares in their demat account on Tuesday, August 26.
Shares of Mangal Electrical are slated to make their D-Street debut by listing on BSE and NSE, tentatively on Wednesday, August 27.
Mangal Electrical IPO registrar, lead manager
Bigshare Services is the registrar for the Mangal Electrical IPO, while Systematix Corporate Services is the sole book-running lead manager.
Mangal Electrical IPO objective
Mangal Electrical proposes to utilise the net proceeds from the public issue for the repayment/prepayment, in full or in part, of certain outstanding borrowings availed by the company, as well as for capital expenditure, including civil works, to expand the facility at Unit IV situated in Rajasthan to optimise space usage and increase storage capacity.
The company will also utilise the IPO proceeds for funding working capital requirements and general corporate purposes.
Should you subscribe to Mangal Electrical IPO?
Anand Rathi Research – Subscribe for long-term
Analysts at Anand Rathi Research have recommended that investors subscribe to the Mangal Electrical IPO for the long-term perspective, citing that the issue appears fully priced. At the upper price band, the company is valued at a FY25 P/E of 32.8x, with a post-issue market capitalisation of ₹1,550 crore.
"In recent years, India's substation capacity has grown significantly, driven by rising electricity demand, creating a favorable environment for transformer manufacturing with consistent demand supporting production planning and operational efficiency," wrote the analysts in the research report.
Canara Bank Securities – Subscribe for long-term
Analysts at Canara Bank Securities have also recommended subscribing to the public issue for the long-term perspective. With a P/E of 24.3x vs. the peer average of 26x, valuations appear reasonable.
"We recommend subscribing for long-term gains, though margins remain vulnerable to raw material price volatility, as seen in FY24 when costs rose by 21 per cent," wrote the analysts in the research report.
Ventura Securities – Subscribe
Brokerage firm Ventura Securities has assigned a 'Subscribe' rating to the public issue. While Mangal Electrical's manufacturing units face underutilised capacity in some areas, the company, according to the brokerage, is focused on increasing production efficiency, improving capacity utilisation, and expanding its geographical footprint to reduce regional dependency.
"Additionally, its strategic focus on quality, technological investments, and strong customer relationships provides a solid foundation for continued growth, particularly with the increasing demand in the power infrastructure and renewable energy sectors," said the brokerage in its report.
About Mangal Electrical Industries
Mangal Electrical Industries Limited specialises in processing transformer components, including transformer laminations, CRGO slit coils, amorphous cores, coil and core assemblies, wound and toroidal cores, and oil-immersed circuit breakers. They also trade CRGO and CRNO coils, as well as amorphous ribbons. Additionally, they manufacture transformers and customised products for the power infrastructure industry. Their transformer range spans from single-phase 5 KVA to three-phase 10 MVA units. They also offer EPC services for setting up electrical substations, serving the power sector.