Sona Comstar IPO (Sona BLW Precision Forgings Ltd. IPO) from the auto component maker plans to raise Rs 5,550 crore. Sona Comstar IPO entails a fresh issue of upto ₹ 300 Cr + OFS upto ₹ 5,250 Cr. The OFS is by its two promoters i) Partial sale by Blackstone backed Singapore VII Topco II Pte.Ltd ii). Sona Autocomp Holding Pvt Ltd.
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Sona Comstar IPO Details:
| Issue Period | Mon, 14th June – Wed, 16 June, 2021 |
| Issue Details | Fresh Issue of Equity Shares |
| Issue Size (₹ Cr) | ₹ 5,550 Cr |
| Price Band | ₹ 285 – 291 |
| Bid Lot | 51 Shares |
| Issue Structure : | |
| QIB | 75% of the offer |
| NIB | 15% of the offer |
| Retail | 10% of the offer (-19,072,164 Shares, ₹ 555 Cr) |
| Retail Appls for 1 x | ~ 3.74 Lacs |
| BRLMs | Kotak Mahindra Capital, Credit Suisse Securities, JM Financial, J.P.Morgan, Nomura Financial |
| Registrar | KFin Technologies Pvt. Ltd. |
Updates :
- ANCHOR ISSUE: Ahead of its IPO, Sona Comstar garnered ₹2,498 crore by issuing shares to institutional investors as part of anchor book allotment. Government of Singapore Investment Corporate (GIC) and Monetary Authority of Singapore (MAS) together made investment of ₹401.5 crore in the anchor book. Other investors include Nomura Asset Management, Fidelity, Eastspring Investments, Goldman Sachs Asset Management, Amundi. SBI MF, Axis MF, Birla MF, HDFC MF, Mirae Asset MF, SBI Life Insurance, Kotak MF, Kotak Life Insurance, Birla Life Insurance, Max Life Insurance, Bharti Axa, Invesco MF, Canara Robeco MF, Sundaram MF, IIFL, Bank of Baroda MF, and Edelweiss etc. also participated in the anchor allotment.
About Sona Comstar (Sona Comstar and Energy Ltd.)
- Sona Comstar (Sona BLW Precision Forgings Limited) is one of the leading automotive technology companies that designs, manufactures, and supplies high-quality engineering automotive systems and components.
- The company sells various products i.e. differential gears, conventional and hybrid starter motors, BSG systems, EV traction motors, differential assemblies, and others across the US, Europe, India, and China.
- Sona Comstar has 9 manufacturing and assembly facilities across India, China, Mexico and USA. Six of these of located in India.
- Sona BLW Precision Forgings Limited has 8 warehouses, of which, 5 are located in India and 3 across USA, Germany, and Belgium.
- Company’s global OEM customer portfolio includes a Global OEM of EVs, a North American OEM of PVs and CVs, Ampere Vehicles, an Indian OEM of PVs, CVs and EVs, Ashok Leyland, CNH, Daimler, Escorts, Escorts Kubota, Geely, Jaguar Land Rover, John Deere, Mahindra and Mahindra, Mahindra Electric, Maruti Suzuki, Renault Nissan, Revolt Intellicorp, TAFE, Volvo Cars and Volvo Eicher.
- Breakdown of company’s sale of goods across geographic markets, and as a percentage of our total sale of goods
Sona Comstar IPO: Financials
| Item / (₹ In Cr) | FY21 | FY20 | FY19 |
| Revenue from Operations | 1566.3 | 1,037.90 | 699.2 |
| Revenue Growth (%) | 50.91% | 48.44% | – |
| EBITDA as stated | 441 | 242.3 | 200.2 |
| EBITDA (%) as stated | 28.20% | 26.70% | 28.90% |
| Profit Before Tax | 299.97 | 387.01 | 154.8 |
| Net Profit for the period | 215.2 | 360.3 | 173.2 |
| Net Profit before EO | 229.11 | ||
| Net Profit (% )as stated | 13.74% | 34.71% | 24.77% |
| Equity Share Capital~ | 573 | 47.2 | 27.7 |
| Instrument entirely equity in nature | – | 0.6 | – |
| Reserves | 730.9 | 1,130.20 | 146.16 |
| Net worth as stated | 1,303.90 | 1,177.90 | 173.8 |
| Long Term Borrowings | 190.7 | 176.8 | 73.3 |
| Short Term Borrowings | 114.5 | 84.6 | 38.9 |
| RoNW (%) | 16.50% | 30.60% | 99.50% |
| Net Asset Value (₹ ) | 22.8 | 23.1 | 5.2 |
| Average ROE (%) | 36.40% | 35.20% | 35.60% |
| ROCE (%) | 34.80% | 29.00% | 40.30% |
| FV | 10 | ||
| EPS (₹ ) | 3.8 | 7.1 | 5.2 |
| Equity Post IPO | 583.31 | ||
| IPO Price | 291 | ||
| EPS (Post IPO) FY21 | 3.93 | ||
| PE | 74.09 | ||
| Market Cap | 16974 | ||
| Market Cap / Sales | 10.8 |
Pros
- One of the leading manufacturers and suppliers to global EV markets
- The company has been gaining market share, diversified across key automotive geographies, products, vehicle segments and customers
- Strong research and development and technological capabilities in both hardware and software development
- Strong business development with customer centric approach
- Consistent financial performance with industry leading metrics; Highly experienced board of directors and management team.
Cons
- Slower than anticipated revival in auto sales
- Steep rise in metal prices could affect margins.
- Forex Risks.
Sona BLW Precision Forgings Limited IPO | Sona Comstar IPO: Assessment
- The company derive 75% of their income from sale of goods with end-use in the overseas market.
- The company is a leading supplier to the fast-growing global electric vehicle markets. It derived 13.8per cent of revenue from the battery EV market and 26.7 per cent from the micro hybrid/hybrid market in FY21. Its global market share of BEV differential assemblies in Calendar 2020 was 8.7 per cent. .Sona BLW Precision Forgings Ltd. is also one of the two largest exporters of starter motors from India.
- Sona BLW Precision Forgings Limited is characterized by a strong technological focus and spent 5.8% of revenues in FY21 on T&D. ~15% of employee count is dedicated to R&D.
- The company has strong R&D, engineering and technological capabilities in precision forging, mechanical and electrical systems, as well as base and application software development. On the back of focus on design and material selection as well as better productivity, the company enjoys operating margin of over 20%.
- The company has opportunity to grow its market share for differential assemblies and differential gears in Europe, where it currently have low market share.
- As on March, 2021, the company had total 15 development programs for supply of systems and components to EV OEMs across North America, Europe, China and India. Out of these, commercial production had commenced for eight programs
- For FY 21, Revenue of the company was up by 51% to Rs 1566 crore.
- some of the listed peers of the company are Motherson Sumi Systems, Sundaram Clayton, Varroc Engineering, Bosch, Bharat Forge, Endurance Technologies and Minda Industries.
- The company has healthy financials with 28% margins and 20% ROCE.
- The valuations demanded at PE of 74x are very much on higher side leaving little room for listing gains.
- Sona BLW Precision Forgings is owned by Blackstone (66%) and Sona Group (34%) at present. The IPO is actually a part-exit for co-promoter Blackstone (95% of IPO is OFS)whose holding will come down from 66% holding to 34%.
- Sona BLW Precision Forgings Ltd. IPO (Sona Comstar IPO) is priced very aggressively. However considering the fact that it provides a strong play on the upcoming mega opportunity of EV wave, its competitive edge, good profitability I intend to apply for it subject to a good response to IPO. Further Iam not comfortable with the valuations and will apply at last few hours on Day 3 if QIB response looks good for the IPO.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.