Yes Securities has apply rating on Endurance Tech IPO By STAFF REPORTER Yes Securities has advised investors to apply for the IPO of Endurance Technologies (ETL), which is an auto component manufacturer engaged in design, development, validation, testing, manufacturing, delivery and aftermarket sale service for a wide range of technology-intensive auto component products. It derives 70 per cent of its total revenues from India and balance from Europe (percentage as of FY16). In India, it manufactures a diverse range of technology-intensive automotive components for two-wheeler and three-wheeler segments. It also manufactures specified components for passenger vehicles, light commercial vehicles (LCVs) and heavy commercial vehicles (HCVs). Its product range in India includes aluminium castings, suspensions, transmission, braking systems and aftermarket services. In Europe, it focuses on engine and transmission components for four-wheeler OEMs. It has 18 manufacturing facilities in India, two in Germany and five in Italy. Endurance Technologies is one of the largest automotive component manufacturers (in terms of revenues) in the two-wheeler and three-wheeler segments in India. The segments have seen growth driven by rising affordability of two-wheelers, growth in demand for two-wheelers in both rural and urban areas, increase in income levels, improvement in road connectivity, increasing urbanisation and improved finance penetration. ETL has strong customer relationships with OEMs in the two-wheeler space. Its customers in India and Europe include leading domestic and global OEMs. In FY6, its largest customers in India were Bajaj, Royal Enfield, Honda and Yamaha. The largest customer for ETL is Bajaj with whom it has a long-standing relationship. In addition to these customers, it also supplies to a variety of other OEMs in India, such as Hero, Mahindra, Suzuki, Tata Motors, H-D Motor Company India and Fiat India. In Europe, the largest customer is FCA Italy. It also supplies to Daimler, as well as other reputable four-wheeler OEMs operating from Europe. It has focused on locating its manufacturing facilities close to the clients’ production facilities to help reduce operating and logistics costs for customers. ETL has been deleveraging its balance sheet by paying off debt. As such the debt to equity ratio for the company has come down from 1.25 times in FY12 to 0.42 times in FY16. At the same time, its return on equity has averaged at 23 per cent over this period. At the price band of Rs 467-472 per share, the IPO is priced at a PE band of 22.6 times to 22.8 times on its consolidated FY16 EPS. Valuations are comparable to that of peers Gabriel India and Rico Auto trading at an FY16 multiple of 22.9 times and 29.6 times, respectively, but a tad expensive to Munjal Showa trading at an FY16 multiple of 13.6 times (based on October 4, 2016 closing price). “We believe the valuations for the IPO are attractive and would recommend an apply rating on the same,” the brokerage said.