Divgi TorqTransfer erases listing gains; slides 5% below issue price on NSE

Divgi TorqTransfer Systems (DTS) made a muted debut on the bourses on Tuesday. The stock was listed with a 5 per cent premuim at Rs 620 on the NSE. This was over its issue price of Rs 590 per share. However, on the BSE, the stock of the auto components & equipments maker opened at Rs 600, up 2 per cent against its issue price.

Post listing, the stock fell to Rs 561.15, down 5 per cent over its issue price on the NSE. At 10:15 am; it was quoting at Rs 570 on the NSE and BSE. It hit a high of Rs 620 on the NSE in intra-day trade, until the time of writing this report. A combined around 2 million equity shares had changed hands on the counter on the NSE and BSE.

DTS is a marquee auto ancillary player in India having capability to develop and provide system level transfer case, torque coupler and DCT solutions. DTS is the largest supplier of transfer case system to PV OEMs in India. It has three manufacturing and assembling facilities in India with one under construction for EV transmission and dual clutch transmission (DCT) and expected to be fully completed by FY24.

The company has strong and well established relationships with several marquee domestic and global OEMs in the automobile sector such as Tata Motors, M&M and with global suppliers such as BorgWarner. With their positioning as a system and solution provider and wide product portfolio, they have been able to retain its existing customers and attract new customers.

Analysts at ICICI Securities had assigned 'SUBSCRIBE for long term' rating on DTS as it bet on the future growth trajectory at the company as trailing valuations discount much of its healthy financial profile. “We like DTS for its technical prowess in transmission space & incremental revenue streams coming on broad going forward in EV transmission as well as Dual Clutch transmission space,” the brokerage had said in an IPO note.

Client concentration risk persists with single largest customer constituting 50 per cent of revenues and top 5 customers constituting 90 per cent plus of sales. The continued geopolitical tensions impacting exports which now constituted 10 per cent of sales in H1FY23 vs 25 per cent plus as of FY22. High dependence on imported content/raw materials (~25 per cent) impacting production capabilities at times of global supply chain disruption are other key risks and concerns, analysts said.

“DTS has a good market opportunity in the EV space and for automatic transmissions in the passenger UV segment on the back of strong demand. Further, they intend to strengthen relationships with existing customers, grow across geographies and focus on tailor-made precision components that would bode well for future growth. Lastly, their focus on R&D, cost optimization measures, sourcing local raw materials and expanding product portfolio will too help drive growth,” analysts at Religare Broking had said in an IPO note.