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SANDHAR TECHNOLOGIES LTD

IPO Report

Issue Date 19th Mar-21st Mar 2018

Price Band 327-332/Share

Bid Lot 45 & in multiplethereof

Face Value Rs 10/Share

Listing BSE, NSE

Offer For Sale 64,00,000 Eq Shares

Fresh Issue Rs 300 Cr

Pre Issue Eq Shares 5.12 Cr Eq Shares

Post Issue Eq Shares 6.02 Cr Eq shares*

BRLM ICICI Securities Ltd, Axis

Capital Ltd

Registrar Link Intime India

Private Ltd

Note * Calculated @ Upper Price Band of Rs 332/ Share

Research Analyst : Astha Jain

IPO Details

Co is the leader in the two-wheeler locking systems market, and the

commercial vehicle rear view market in India, and is one of the two largest

companies catering to the commercial vehicle locking systems market, and

the two wheeler rear view market in India. Co is also one of the two largest

manufacturers of operator cabins in India, along with being the largest

player in the excavator cabins market (Source: CRISIL Report). Co’s business

involves designing and manufacturing a diverse range of automotive

components, parts and systems, driven by technology, process, people and

governance.

Long-standing, and growing relationships with major OEMs :Co have

long-standing relationships with 79 Indian and global OEM customers,

which include some leading companies such as Ashok Leyland, Doosan

Bobcat, Escorts, Hero, Honda Cars, Komatsu, Scania, TAFE, Tata Motors, TVS,

UM Lohia, and Volvo. Co have grown its client base over the last few years to

include OEMs such as Caterpillar, CTS, Hyundai Construction, International

Tractors, JCB, Kobelco, Mahindra & Mahindra, and SML Isuzu.

Joint Ventures & Collaborations : Co currently have six Joint Ventures

which manufacture products such as high precision press parts, insert

moulded contact plates, AVN panels, and switches. In addition to co’s joint

ventures, co have also entered into technical collaborations, inter alia, with:

(i) Honda Lock for availing technical advice from Honda Lock in relation to

door mirrors, outside door handles, and key sets for automobiles and

motorcycles, and (ii) JEM Techno for availing technical advice from JEM

Techno in relation to relays used in automobiles. Co have also collaborated

with leading international players for development of parking assistant

systems, fuel filters, fuel modules, starter motors and shark-finned antennas

Valuation

Co is bringing the issue at p/e multiple of 28.7-29.19 on post issue H1FY18

annualized eps at price band of Rs 327-332/share. Co with its long-standing,

and growing relationships with major OEMs has diversified product

portfolio along with in-house research and development, design capability

and technical collaborations. Looking after strong fundamentals of company,

we recommend “Subscribe” to issue.

▪ Experienced and strong management team backed by good governance

standards

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Company Overview

Co is a customer centric component supplier primarily catering to automotive OEMs and largely

focused on safety and security systems of vehicles with a pan India presence and a growing

international footprint. Co’s business involves designing and manufacturing a diverse range of

automotive components, parts and systems, driven by technology, process, people and governance.

Presently, co manufacture 21 categories of products, including such product categories that are

manufactured through its subsidiaries and Joint Ventures, which cater to different industry segments.

Co’s portfolio comprises various categories of products including safety and security systems such as

lock assemblies, mirror assemblies, operator cabins for off-highway vehicles, aluminium spools,

spindles, and hubs. Co also manufacture other product categories including wheel assemblies, handle

bar assemblies, brake panel assemblies, sheet metal components such as fuel filler caps, fuel cock

assembly, step pillions, tools, dies, moulds, other aluminium components, crane and tractor parts,

plastic and painted parts such as door handles (inner and outer), panels for televisions, and cabinets

for air conditioners.

Company manufacture its products from 31 manufacturing facilities across eight states in India, two

manufacturing facilities in Spain, and one manufacturing facility in Mexico. This apart, co also have an

overseas assembly and packaging centre located in Poland. Further, through SCID, co’s research and

development activities are undertaken at Gurugram, Haryana. Co’s customer portfolio consists of 79

Indian and global OEMs across various segments, including those indicated in the table below:

Segment Total No of OEM Customers Key OEM Customers Two -Wheelers

9

Hero TVS Royal Enfield Suzuki UM Lohia

Passenger Vehicles 21 Honda Cars Passenger Vehicles & Commercial Vehicles

Tata Motors Ashok Leyland

Commercial Vehicles Scania SML Isuzu

Commercial vehicles, Off -Highway Vehicles & Tractors

34

Atlas Copco Caterpillar Doosan Bobcat Escorts Hyundai Construction International Tractors HCB Kobelco Komatsu LeeBoy India Mahindra & Mahindra Potain India Tata Hitachi Tafe Volvo

Non- Automotive 15 Forza Medi

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Investment Rationale

Experienced and strong management team backed by good governance standards

Co have a well – qualified management team that has significant experience in all aspects of its

business. Co’s management team is led by its Promoter, Jayant Davar, who serves as Co-Chairman

and Managing Director. He is a mechanical engineer with 30 years of experience in the industry of

auto components. With substantial industry, operational, and financial experience, co’s

management has led the expansion of its operations from four manufacturing facilities in India as

on March 31, 2005, to 31 manufacturing facilities in India, two manufacturing facilities in Spain,

and one manufacturing facility in Mexico, as on the date.

Diversified product portfolio

Co’s portfolio comprises various categories of products including safety and security systems such

as lock assemblies, mirror assemblies, operator cabins for off-highway vehicles, aluminium spools,

spindles, and hubs. Co also manufacture other product categories including wheel assemblies,

handle bar assemblies, brake panel assemblies, sheet metal components such as fuel filler caps,

fuel cock assembly, step pillions, tools, dies, moulds, other aluminium components, crane and

tractor parts, plastic and painted parts such as door handles (inner and outer), panels for

televisions, and cabinets for air conditioners

Production facilities close to its customers based on co’s philosophy – ‘Be Glocal’

Co’s constant strategy has been to invest in locations close to its OEM customers’ plants, which

has been a key factor in aiding a strong relationship with co’s OEM customers. Co’s manufacturing

facilities are in close proximity to its OEM customers’ plants in all key auto-clusters in India. For

example, co’s manufacturing facilities at Gurugram, Chennai, and Bengaluru are close to plants of

Hero, Royal Enfield, and TVS, respectively. Further, in line with its philosophy of being ‘Glocal’, co

have manufacturing facilities in Mexico and Spain, and an assembly and packaging centre in

Poland, to cater to customers in western Europe, eastern Europe and NAFTA markets. Co’s

presence in all key auto-clusters in India allows to optimise its deliveries to its customers and

facilitates greater interaction with its customers by enabling co to respond to their requirements

in a timely manner.

Risk Factors

Co depend on a limited number of customers for a significant portion of its revenues. The loss of a

major customer or significant reduction in production and sales of, or demand for co’s products

from its major customers may adversely affect co’s business, financial condition, results of

operations and prospects.

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Objects of Offer

Offer For Sale

Company will not receive any proceeds from the Offer for Sale.

Fresh Issue

Company proposes to utilise the Net Proceeds from the Fresh Issue towards:

• Repayment or prepayment in full, or in part of certain loans availed by company worth of

Rs 225 Cr

• General corporate purposes

Financial Statements

Rs Cr

Particulars FY15 FY16 FY17 H1FY18 Total Income 1482.05 1513.22 1626.87 989.41 Operating Exp 1342.90 1371.91 1481.06 887.03 EBIDTA 139.15 141.31 145.81 102.38 EBIDTA Margin (%) 9.39 9.34 8.96 10.35 Other Income 5.29 4.67 6.66 1.19 Depreciation 52.37 55.15 60.28 33.67 EBIT 92.07 90.83 92.20 69.90 Interest 40.67 41.87 42.24 19.80 PBT 51.40 48.97 49.95 50.10 E/O Item 0.00 3.74 0.51 0.00 PBT After E/O Item 51.40 45.22 49.45 50.10 Tax 13.03 11.47 9.89 15.52 PAT 38.68 33.75 39.56 34.57 Other Comp Inc 0.12 0.30 0.37 0.34 Adjusted PAT 38.26 33.45 39.19 34.23 NPM(%) 2.58 2.21 2.41 3.46 Eq Capital 10.23 51.16 51.16 51.16 Res & Surplus 248.97 222.48 250.182 279.57 Net Worth 259.20 273.63 301.33 330.72 Eq Shares ( In No) 102 5.12 5.12 5.12 EPS 37.40 6.54 7.66 6.69 ROE (%) 14.76 12.22 13.01 10.35 ROCE (%) 9.05 8.26 7.20 6.83 Book Value 253.37 53.49 58.91 64.65

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HEM SECURITIES LIMITED

MEMBER-BSE,CDSL,SEBI REGISTERED CATEGORY I MERCHANT BANKER

Sebi Registration No For Research Analyst: INH100002250

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GROUP COMPANIES

HEM FINLEASE PRIVATE LIMITED

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HEM MULTI COMMODITIES PRIVATE LIMITED

MEMBER-NCDEX, MCX

HEM FINANCIAL SERVICES LIMITED

NBFC REGISTERED WITH RBI

Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other

sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to

ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase

or sell of any financial instrument and at any point should not be considered as an investment advice. Reader is requested to rely

on his own decision and may take independent professional advice before investing. Hem Securities Limited, Hem Finlease Private

Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The

person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi

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The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or

issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific

recommendations and views expressed by research analyst(s) in this report.

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