Dhoot Transmission IPO: Potential 29% Listing Gain

Dhoot Transmission’s Initial Public Offering (IPO) is nearing its close on August 12, with a Grey Market Premium (GMP) of Rs 250 indicating a potential listing gain of nearly 29%. The IPO, valued at Rs 3,066.89 crore, opened for subscription on August 10 and is slated for listing on August 17.

IPO Key Figures

• IPO Value: Rs 3,066.89 crore
• Price Band: Rs 829-871 per share
• GMP: Rs 250, suggesting ~29% listing gain
• Listing Date: August 17

On its first day, the IPO recorded a subscription rate of 0.62 times overall. Retail investors subscribed 0.76 times, while non-institutional investors showed stronger interest at 1.02 times. Qualified institutional buyers (QIBs) notably subscribed only 0.06 times.

Brokerage Recommendations

Brokerage firms including Anand Rathi, Swastika Investmart, Choice Securities, and Ventura Securities have issued “Subscribe” recommendations for long-term investment. These recommendations are based on Dhoot Transmission’s strong market position and growth prospects.

Company Strengths and Growth Drivers

• Market Position: Strong standing in the automotive wiring harnesses sector.
• EV Exposure: Significant involvement with electric vehicles (EVs).
• Revenue Growth: Demonstrated robust revenue expansion.

Despite these positives, the company faces several identified risks. These include a high customer concentration and exposure to fluctuating raw material prices, which could impact future performance.

Identified Risks

• Customer Concentration: Top five customers contribute 71.6% of FY26 revenue, with Bajaj Auto accounting for 31.8% alone.
• Raw Material Volatility: Exposure to price fluctuations in essential raw materials.
• Declining Profitability: EBITDA margin decreased from 18.3% in FY24 to 15.7% in FY26.

The proceeds from the IPO are earmarked for strategic financial and operational enhancements. A significant portion will address existing debt and expand manufacturing capabilities.

Utilisation of IPO Proceeds

• Debt Reduction: Rs 464.8 crore for company debt, Rs 301.8 crore for subsidiaries.
• New Plants: Establishing two new manufacturing facilities in Haryana and Tamil Nadu, adding 3.06 million units capacity.
• Strategic Initiatives: Funding potential acquisitions and general corporate objectives.

Brokerages view the company’s valuation at 44.9 times FY26 earnings as reasonable. This assessment considers Dhoot Transmission’s established market position and its growth potential within the expanding EV segment.