Endurance & Varroc IPOs ~ An Enduring Success Tale of Twins

Really happy for them ! ~ Anurang & Tarang Jain ~ Twins from our Sydenham College Mumbai Class of 83 & with who I’ve enjoyed long bridge sessions that often stretched into early morning while we were college mates

Related to the Bajaj Family, both were inspired & guided after post graduation to set up Auto Components Plants in Aurangabad to begin with  ~ Tarang set up Varroc Engineering in 1988 while Anurang founded the Endurance Technologies Group with it’s roots being an Aluminium Casting Plant in 1985.Their Footprint has spread globally with Endurance establishing Operations through Subsidiaries in Italy & Germany & three step down subsidiaries in Italy while Varroc has 36 plants in seven countries that include servicing North America too

Yesterday Varroc’s IPO,full offer for Sale of 20221730 Equity Shares of FV Rs 1, opened for subscription in the Rs 965-Rs 967 Band that implies at top end an IPO Size of Rs 1955 crs & a Valuation of  over Rs 13000 crs .It closed FY 18 with a Consolidated Top line of @ Rs 10400 crs

Earlier in October 2016 Anurang had already rung the success bell with Endurance’s IPO,an full offer for sale too at Rs 472 for an Equity Share of FV Rs 10, which was oversubscribed 43.7 times .Today Endurance quotes @ Rs 1250 giving a Market Cap of Rs 17700 crs.It closed FY 18 with a consolidated top line of Rs 6690 crs

Post Varroc’s IPO the Twins Companies should command a combined Market Cap of over Rs 30700 crs or @ US $ 4.5 billion on combined topline of over Rs 17000 crs or US $ 2.5 billion.Post IPO Promoters hold 82.5% of Endurance & 85% of Varroc giving the Jains a combined market wealth of over Rs 25500 crs or @ US $ 3.8 billion.Endurance is also a darling of the FPIs/MFs/DIIs .They collectively hold over 15% of the Equity leaving  under 2.5% as non institutional public float.This scenario should repeat itself also in Varroc with Anchor Investors already lapping up 5% though  it is interesting to see that neither Reliance MF nor HDFC MF are among the eight Anchor MFs…perhaps they’ll apply now or would love to know their reason for not participating  

Impressive Numbers already

Both Companies have a common Chairman,Mr Naresh Chandra

However,any Assessment from a shareholder’s viewpoint is always centered on ‘Value Vs Price’.There are always risks,largely operating,financial & legal,that companies face.

Varroc had negative Cash Flows in FY 18 & operates at lower EBITDA margins than Endurance.It also has @ Rs 1000 crs as Debt on it’s Balance Sheet at March 31,2018 of which Rs 636 crs is Long Term.Till FY 15 it was struggling with the bottomline.It’s also on the RBI watchlist as some of it’s export billings have yet to be realised over two years on …just a thought ~ 10 Million fresh issue of equity shares would have made the company debt free while increasing Equity Capital merely from Rs 13.48 crs to Rs 14.48 crs…would have saved the Company Rs 90 crs in Interest too…though issue size would have gone up to Rs 3000 crs… Tarang did come on TV yesterday to state the Debt/Equity is low at 0.3 & company does not need funds and can manage all expansion through internal accruals.He has a vision of a top line of Rs 20000 crs by 2020 & to move up Global ranking from current 6 in external lighting systems to 3 or 4…currently does Rs 7000 crs in this segment while No 5 globally does twice this read more