IPO Update: Tega Industries

Company Introduction: Tega Industries (Tega) manufactures components of mining equipment. These components are used across different stages of mineral ore processing. Tega Industries manufactures specialized mining equipment components such as grinding mill-liners, chutes, pump parts, conveyors belts, etc. which are used in mineral processing. These components are critical to Tega’s clients as they not only help to improve operational efficiency of the mineral processing but also reduce the production downtime. 

Globally, Tega is the second-largest producer of polymer-based mill liners. In 2020, it had a 5% market share in the overall global mill-liner market, up from 3% in 2018. Tega has six manufacturing sites: three in India and the other three strategically located in Chile, South Africa, and Australia.

IPO Timeline

    Application start

01-12-2021

Application end

03-12-2021

Allotment begins

08-12-2021

Refund Initiation

09-12-2021

Allotment date

10-12-2021

Listing on exchange

13-12-2021

Key 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. 

• PAT has increased from Rs.32.7 Crores in FY19 to Rs.65.5 Crores in FY20 to Rs.136.4 Crores to FY21

Key Weaknesses

• 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. 

Business Growth 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.

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