Sona Comstar’s Rs 5,550-crore IPO opens; promoters to cut stake, should investors subscribe or not?

Sona BLW Precision Forgings’ (Sona Comstar) Rs 5,550 crore preliminary public providing opened for subscription right this moment.

Sona BLW Precision Forgings’ (Sona Comstar) Rs 5,550 crore preliminary public providing opened for subscription right this moment. The IPO is a mixture of recent situation of fairness shares price Rs 300 crore and the remaining is a proposal on the market (OFS) by present shareholders, together with Blackstone’s affiliate Singapore VII Topco III Pte Ltd. Sona Comstar is without doubt one of the main important auto elements producers globally. The corporate can be a distinguished participant within the electrical automobile phase domestically. Promoter shareholding publish situation will drop to 67%, whereas public shareholding will enhance to 33%.

Buyers can bid for the problem in a bid lot of 51 shares, in a worth band of Rs 285 – 291 per share. This interprets to a minimal funding of Rs 14,841. Of the entire situation, 75% or has been reserved for certified institutional consumers (QIB). Non-institutional traders (NII) are eligible to bid for 15% of the entire situation whereas smaller retail traders can solely bid for 10% of your entire IPO. Buyers can place bids until June 16. Forward of the problem, Sona Comstar has allotted 85,824,742 fairness shares to anchor traders for a complete of Rs 2,497 crore. Anchor traders embody the Authorities of Singapore, SBI Mutual Fund, Nomura India Funding Fund, Constancy Funds, Goldman Sachs, HDFC Mutual Fund, IIFL Mutual fund, amongst others.

Electrical automobile phase play

“We like SBPFL given its presence within the fast-growing world EV market, diversified portfolio throughout classes and sturdy financials,” mentioned analysts at Motilal Oswal, valuing the agency at 74.1x FY21 P/E on a post-issue foundation. “Although the valuation seems absolutely priced in, given its thrust in fast-evolving EV area each in India and globally, the market want to give premium to such rising progress story. Therefore, we suggest Subscribe for Lengthy Time period,” they added. 

World attain

Even analysts at ICICI Direct discover the EV phase play aligned with Sona Comstar to be a key differentiator. ICICI Direct mentioned that in FY21, the corporate obtained almost 40% of revenues from ‘electrified’ platforms, together with 14% from pure battery EVs. Nonetheless, it’s not simply the EV play that’s interesting with regards to Sona Comstar. ICICI Direct analysts highlighted that the corporate has a worldwide attain and diversified market presence one other optimistic for traders to take a look at. The brokerage agency has a Subscribe just for long run ranking.

Excessive valuations 

However some are involved concerning the excessive valuations. “At an higher worth band of Rs 291, SONA BLW IPO is priced at 77.6x P/E and 12.8x P/BV. The valuations are very costly for an organization that has clocked no progress within the final 3 years! What’s extra, the corporate is demanding an astronomical valuation of 10.8x Worth to gross sales,” mentioned Aditya Kondawar, Founder, COO, JST Investments. He added that Sona Comstar is an keep away from for JST Investments since many listed ancillaries can be found at 1x Worth to gross sales or beneath.