Tega Industries Ltd. - IPO Note

Consumables - Mining & Minerals

Tega Industries Ltd. - IPO Note

Consumables - Mining & Minerals

Price range
Rs. 443-453
Issue Period:
Dec 01, 2021
Dec 03, 2021
November 30, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 619 cr.
Public Issue
1.37 cr. shares
Market cap post IPO
Rs 3003 cr.
Equity Pre - IPO
Rs 57.60 cr.
Equity Post - IPO
Rs 57.60 cr.
Issue type
Offer For Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Key Strengths and Strategies

High entry barriers to replace or substitute critical products:
Company’s products are critical to the overall productivity of a mineral processing site. Mineral processing sites do not tend to switch to a substitute supplier, even if the product offered by a new entrant or established substitute supplier is comparatively cheaper. This is due to the high cost of initial planning involved, the lead time required for approval, degree of certainty of the products of an established supplier, the high cost of downtime or shutdown of a site and relatively lower percentage cost of their components in the total operating costs of a mineral processing site. Since mineral processing sites ordinarily refrain from switching and remain with an existing approved supplier, they have the flexibility to maintain high margins throughout the period of their association with a mineral processing site. It takes from 9 months to 1 year to become an approved supplier at every customer site and once approved, these approvals do not have an expiry period.

Insulated from mining capex cycle as the products cater to after-market spends:
Company’s products cater to the after-market spend of a mining processing unit. After-market spend is typically 3 times of the upfront capex spend over the lifecycle of a mill, and is a recurring cost for miners. After-market spend for a mining processing unit comprises regular operating expenses which include costs of wear and separation parts, grinding media, power consumption, liners and other regular operating expenses. Company’s end-customers are mineral processing sites involved in gold and copper ore beneficiation accounting for 45.48% and 20.76% respectively of their sale of products for the quarter ended June 30, 2021. Gold and copper mill sites require superior quality of consumables and have higher beneficiation requirements. Despite some volatility in capital expenditure cycles for gold and copper mining sites, their business was not impacted, as a majority of their products were linked to the operating expenditure budget of a mining site and not capital expenditure.

Capability to provide customized value added products:
Company’s in-house R&D and manufacturing capabilities, including design, process engineering and manufacturing facilities, allow them to turn around customized designs in a short time frame, offer comprehensive solutions and better service standards and cross sell multiple products to their customers. The company designs and customizes products uniquely for each customer site, taking into account multiple characteristics of the application including type of ore, ore size, tonnage, breakage rate, power or rotational speed, pH, temperature, humidity, size, distribution and trajectory, sound levels, health and safety standards. They have a track record of developing and commercializing a diverse and innovative product portfolio of 55 mineral processing and material handling products over the years.

Strong global manufacturing and sales capabilities:
Tega has a track-record of servicing leading global mining companies for a long period of time and in several cases, their relationships with key customers span more than 10 years, leading to high repeat revenues for them. Company’s extensive footprint across key mining belts worldwide has allowed them to enjoy economies of scale and logistical advantages and develop significant insight into their customers’ needs and market trends. Their sales and distribution network is also in-house, with 18 overseas and 14 domestic sales offices strategically located in all the key geographies close to key customers, supported by 155 member dedicated sales and servicing team with ability to assist pre sales and after sales services and in select geographies by commission agents from time to time.

Leverage in-house R&D capabilities to grow the product offerings and capitalize on future trends:
The company plans to continue expanding their R&D capabilities in order to capture future growth trends. Their in-house R&D team comprises of 36 personnel focusing on upgrading their existing products, developing product variants and new products using their customized software for structural analysis, flow analysis, 3D modeling and product selection. Further, they seek to continue to focus on their ability to customize product offerings according to the specific requirements of their customers through innovation and focusing on sustainable solutions.


Fluctuation in raw material prices:
Any shortfall or delay in the supply of raw materials or an increase in raw material costs, may adversely affect the business margins as company may not be able to pass on the same to its customers, which may in turn adversely impact the financial condition and results of operations.

No long-term/exclusive contracts with raw material suppliers:
The company is dependent on few key suppliers of certain raw materials and do not have long term contracts or exclusive arrangements with these key suppliers. Accordingly, the loss of, or a significant reduction in supply by, such suppliers could adversely affect the business, financial condition and results of operations.

Failure to obtain or renew necessary regulatory approvals, licenses, permits in a timely manner:
The company operations are subject to extensive government regulations and require a number of statutory & regulatory permits and approvals under central, state and local government rules in the geographies in which it operates. In case any approvals or licenses are cancelled, or its use is restricted, then it could adversely affect the results of operations or growth prospects.

The issue is purely an OFS:
The issue is purely an OFS and company will not get any capital from this issue. All proceeds will go to such selling investors.

Company Description

Tega Industries is a leading manufacturer and distributor of specialized, critical, and recurring consumable products for the global mineral beneficiation, mining, and bulk solids handling industry. Tega commenced their operations in 1978 in India, in collaboration with Skega AB, Sweden. Globally, they are the 2nd largest producers of polymer-based mill liners, on the basis of revenues as of June 30, 2021. The company offers a wide product portfolio of specialized abrasion and wear-resistant rubber, polyurethane, steel, and ceramic-based lining components used by their customers across different stages of mining and mineral processing, screening, grinding, and material handling. The company's product portfolio comprises of more than 55 mineral processing and material handling products. The company has 6 manufacturing sites, including 3 in India and 3 sites in major mining hubs of Chile, South Africa, and Australia, with a total built-up area of 74255 Sq. mts.


The company’s engineering capability has evolved over decades and has enabled them to consistently offer high quality complex manufactured products within stipulated timelines, allowing them to reduce downtime and maximize operational efficiency for their customers, and forge robust relationships with their customers leading to high recurring revenues and good margins. At the upper price band of Rs 453, the IPO is valued at ~22x FY21 earnings. With covid restrictions easing out, the company’s plant utilization has improved, raw material suppliers have resumed operations and supply and logistics have become more regular. However, we believe the issue is fairly priced. Hence, we recommend investors to SUBSCRIBE to the IPO for listing day gains only.

Key Information

Use of Proceeds:
The total issue size of Rs. 619 crores is fully an OFS constituting offer for sale of up to 1.37 crore equity shares by promoters & investors. Company will not get any capital from this issue. All proceeds will go to such selling investors.

Book running lead managers:
Axis Capital, JM Financial

Madan Mohan Mohanka is one of the Promoters of the company, and the Chairman & Executive Director of the company. He has been associated with the company since its incorporation. Mehul Mohanka is one of the Promoters of the company, and the Managing Director & Group CEO of the company. He has been associated with the company since almost 2 decades and has been instrumental in diverse functions of the company, such as sales and operations.

Financial Statement

Profit & Loss Statement:- (Consolidated)

Yr End March (Rs Cr) FY19 FY20 FY21
Net Sales 634.00 685.00 806.00
Material Cost 257.00 274.00 324.00
Employee Cost 111.00 115.00 123.00
Other Expenses 168.00 189.00 172.00
EBITDA 98.00 107.00 187.00
EBITDA Margin 15.00% 16.00% 23.00%
Depreciation & Amortization 38.00 38.00 41.00
EBIT 60.00 69.00 146.00
Other Income 9.00 11.00 51.00
Interest & Finance Charges 24.00 21.00 17.00
Share of profit/(loss) from JV 2.00 2.00 3.00
Profit Before Tax - Before Exceptional 47.00 61.00 183.00
Tax Expense 14.00 -6.00 47.00
Effective Tax rate 30.00% 26.00% 26.00%
Net Profit 33.00 67.00 136.00
Net Profit Margin 5.00% 10.00% 17.00%