IPO listed on 30 Dec'24
Carraro India Ltd
Minimum Investment
₹ 14,784 / 21 shares
Grey market premium
₹ 0
Issue price
₹ 704
Listing price
₹ 651
Listing gains
-53 (-8%)
Listing on
Dec 30, 2024
Our Verdict:
Neutral
- Between FY22–FY24, Carraro India Ltd (Carraro) displayed consistent financial performance, with an average Return on Equity of 14%, Return on Capital Employed of 15%, annual revenue growth of 9%, and a notable 69% increase in net profit.
- At the upper end of the price band, the stock is valued at a P/E ratio of 45.8x and a P/BV ratio of 9.6x.
- Benefitting from India’s substantial share (35–40%) in the global tractor market and the rising demand for construction vehicles due to urbanization, Carraro is well-positioned for growth. However, the presence of well-established competitors, both domestically and internationally, may impact its potential.
- Given these factors, it is advisable for investors to closely monitor the company’s financial performance and operational execution in the next couple of quarters before making investment commitments.
About the company
Founded in
11 Apr'97
Managing director
Balaji Gopalan
- Carraro is a technology-driven, integrated supplier specializing in complex engineering products and solutions for its Original Equipment Manufacturer (OEM) clients. As an independent tier 1 provider, it offers axles, transmission systems, and gears, primarily serving the agricultural tractor and construction vehicle sectors in India.
- Carraro delivers comprehensive services across the full value chain, including product design and manufacturing, all handled in-house. Its product portfolio is diverse, featuring axles and transmission systems for various horsepower ranges of off-highway vehicles. It also produces gears, shafts, and ring gears for the industrial and automotive sectors.
STRENGTHS
- Market Leadership: Carraro stands as the sole supplier in the non-captive agriculture tractors transmission market and holds a commanding 60-65% market share in the non-captive construction vehicle transmission market.
- Exceptional Financial Growth: Carraro has demonstrated impressive financial performance, with its operational revenue, EBITDA, and net profit experiencing significant compounded annual growth rates (CAGRs) of 9%, 35%, and 67% respectively, from FY22 to FY24.
- Improving Margins: The EBITDA margin has consistently risen from 5.45% in FY22 to 8.3% in FY24, reaching 10.96% in the six-month period ending September 30, 2024. The net profit margin has similarly improved from 1.50% to 5.44%.
- Healthy Return Metrics: Carraro boasts robust return ratios, with a Return on Equity of 18% and a Return on Capital Employed of 19% as of FY24.
- Strong Customer Relationships: Carraro maintains long-term relationships with its top 10 customers, who have reliably partnered with the company for at least 15 years as of September 30, 2024.
RISK FACTORS
- Customer Concentration: Carraro heavily relies on its top 10 customers, generating 88% of its revenue from them in the six months ending September 30, 2024, and 85% in FY24. Loss of any key customers or failure to broaden the customer base could adversely impact business operations and financial results.
- Comparative Margin Disadvantage: Despite year-on-year improvements, Carraro’s EBITDA and net profit margins remain below industry averages, which could be a competitive disadvantage.
- Legal Challenges: Carraro is involved in ongoing legal disputes along with its subsidiaries, and promoters, with potential liabilities of Rs 320 crore. Negative outcomes could damage its reputation and operational capability.
- High Working Capital Needs: Carraro requires substantial working capital, with total borrowings of Rs 196 crore as of September 30, 2024, and a net working capital turnover ratio of 4.2. Inability to meet repayment obligations or other financial covenants could negatively affect its business viability, cash flows, and credit standing.
- Contingent Liabilities: Carraro faces contingent liabilities totalling Rs 194 crore, which are not yet accounted for. Realization of these liabilities could negatively impact the financial standing of the company.
Issue details
Issue type
Mainstream
Issue size
₹ 1250 crore
Fresh Issue
₹ -
OFS
₹ 1250 crore
Price range
₹ 668 - 704
Lot size
21 shares
Issue Objective
This is purely an offer for sale, which means that the company itself will not receive any proceeds from the offer. All proceeds will go directly to the selling shareholders.
Dates
Bidding open
20 Dec'24
Bidding close
24 Dec'24
Allotment date
26 Dec'24
Refund date
27 Dec'24
Listing
30 Dec'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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