Sansera Engineering IPO: Information analysis

Incorporated in 1981, Sansera Engineering is a manufacturer of complex and critical precision-engineering components used across the automotive and non-automotive sectors. Within the automotive sector, the company manufactures connecting rod (39.6 per cent of FY21 revenue), rocker arm (19.5 per cent), crankshaft (17.2 per cent), gear shifter fork (6.6 per cent), stem comp (3.8 per cent) and aluminium forged parts, which are critical for the engine, transmission, suspension, braking, chassis and other systems of two-wheelers, passenger and commercial vehicles. In the non-automotive sector, the company manufactures a range of precision components for aerospace (3.8 per cent in FY21), off-road, agriculture and other segments, including engineering and capital goods. For FY21, the automotive sector contributed 88.45 per cent to the total revenues, while the non-automotive sector contributed 11.55 per cent. In FY21, the company derived 64.9 per cent of its revenue from India, while Europe (25 per cent), the USA (7 per cent) and other foreign countries (3 per cent) made up the rest. Sansera is one of the top 10 global suppliers of connecting rods in the light-vehicle segment (2.3 per cent market share) and in the commercial-vehicle segment (3 per cent) for CY 2020. As expected by CRISIL Research, the precision-engineering industry is likely to log a CAGR of 10.2 per cent during FY 21-26, buoyed by the growth in domestic auto components and exports. Further, indigenous manufacturing in the defence segment is likely to propel the industry's growth. As on July 31, 2021, the company had 16 manufacturing facilities, of which 15 were based in India and one in Sweden. Strengths 1. Auto component makers work in close tandem with original equipment manufacturers (OEMs) and generally have long-term relationships with their customers. The company has long-standing relationships of 10 years or more with 12 of the top 20 customers. 2. Sansera is the largest supplier of connecting rods, rocker arms and gear shifter forks to two-wheeler OEMs in India. It is also the largest supplier of connecting rods and rocker arms to passenger-vehicle OEMs in India. The company has been associated with Bajaj for 25 years and Honda Motor and Yamaha for over 20 years in the two-wheeler segment. In the passenger-vehicle segment, it has been associated with Maruti Suzuki for over 30 years. 3. While production in the auto sector has declined over the last year, the company has been able to increase its revenue by 4.6 per cent from Rs 1,393 crore to Rs 1,457 crore. The company outperformed the industry trends by introducing new product families and acquiring new customers. 4. Sansera's operations are integrated across the product cycle and almost all manufacturing activities are carried out in-house. This enables it to respond to an