Dhoot Transmission IPO opens with 30% GMP: Should you bid?
What's the story
Dhoot Transmission Ltd. has opened its ₹3,066.89 crore initial public offering (IPO) today. The issue consists of a fresh issue of 1.61 crore equity shares worth ₹1,400 crore and an Offer for Sale (OFS) of 1.91 crore shares worth ₹1,666.89 crore. Under the OFS, BC Asia Investments XV Ltd will sell shares worth nearly ₹1,395 crore while Mangalam Capital Pvt Ltd will offload shares worth around ₹272 crore.
Pricing
Price band set at ₹829-₹871 per share
The company has set the IPO price band at ₹829-₹871 per share. The public issue will be open for subscription from today until August 12.
The allotment basis is likely to be finalized on August 13, with shares expected to debut on NSE and BSE on August 17.
At the upper end of the price band, retail investors will have to pay a minimum of ₹14,807 for one lot as each lot consists of 17 shares.
Market performance
Grey market premium at around ₹259 per share
Ahead of its opening, the Dhoot Transmission IPO commands a gray market premium (GMP) of around ₹259. This suggests a possible 30% premium over the upper end of the IPO price band.
On August 7, Dhoot Transmission had raised ₹918.27 crore from 72 anchor investors ahead of its initial public offering by allotting equity shares at ₹871 apiece, which is also the upper end of the IPO price band.
Utilization
Proceeds to be utilized for debt repayment and prepayment
Dhoot Transmission intends to use the IPO proceeds to strengthen its balance sheet and fund future growth initiatives.
A major chunk of the net proceeds, around ₹464.8 crore, will go toward repaying or prepaying certain outstanding borrowings.
Nearly ₹301.77 crore will be infused into subsidiaries such as Dhoot Autocomponents Private Limited, Dhoot Electricals Systems Private Limited, Dhoot Automotive Systems Private Limited, and Dhoot Transmission UK Limited for debt reduction purposes.
Growth strategy
Funds will also be used for setting up new manufacturing
The company has also allocated ₹150 crore to set up new wiring harness manufacturing facilities at Jhajjar, Haryana, and Shoolagiri, Tamil Nadu. This will boost production capacity to meet rising demand.
The remaining funds will be used for inorganic growth opportunities through acquisitions and general corporate purposes.
Founded in April 1998, Dhoot Transmission is a leading electrical and electronics (E&E) company in India that designs, engineers, manufactures and supplies wiring harnesses & electrical distribution systems for automotive/industrial applications.