HomeFinanceSona Comstar’s Rs 5,550-crore IPO opens promoters to reduce stake, need to...

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

Sona BLW Precision Forgings’ (Sona Comstar) Rs 5,550 crore initial public supplying opened for subscription today. The IPO is a mix of fresh problem of equity shares worth Rs 300 crore and the remaining is an supply for sale (OFS) by current shareholders, like Blackstone’s affiliate Singapore VII Topco III Pte Ltd. Sona Comstar is one of the major important auto elements makers globally. The corporation is also a prominent player in the electric automobile segment domestically. Promoter shareholding post problem will drop to 67%, although public shareholding will enhance to 33%.

Investors can bid for the problem in a bid lot of 51 shares, in a price tag band of Rs 285 – 291 per share. This translates to a minimum investment of Rs 14,841. Of the total problem, 75% or has been reserved for certified institutional purchasers (QIB). Non-institutional investors (NII) are eligible to bid for 15% of the total problem although smaller sized retail investors can only bid for 10% of the complete IPO. Investors can spot bids till June 16. Ahead of the problem, Sona Comstar has allocated 85,824,742 equity shares to anchor investors for a total of Rs 2,497 crore. Anchor investors include things like the Government of Singapore, SBI Mutual Fund, Nomura India Investment Fund, Fidelity Funds, Goldman Sachs, HDFC Mutual Fund, IIFL Mutual fund, amongst other individuals.

Electric automobile segment play

“We like SBPFL given its presence in the fast-growing global EV market, diversified portfolio across categories and robust financials,” stated analysts at Motilal Oswal, valuing the firm at 74.1x FY21 P/E on a post-problem basis. “Though the valuation appears fully priced in, given its thrust in fast-evolving EV space both in India and globally, the market would like to give premium to such emerging growth story. Hence, we recommend Subscribe for Long Term,” they added. 

Global attain

Even analysts at ICICI Direct come across the EV segment play aligned with Sona Comstar to be a crucial differentiator. ICICI Direct stated that in FY21, the corporation obtained almost 40% of revenues from ‘electrified’ platforms, like 14% from pure battery EVs. However, it is not just the EV play that is attractive when it comes to Sona Comstar. ICICI Direct analysts highlighted that the corporation has a worldwide attain and diversified marketplace presence a different positive for investors to look at. The brokerage firm has a Subscribe only for extended term rating.

High valuations 

But some are concerned about the higher valuations. “At an upper price band of Rs 291, SONA BLW IPO is priced at 77.6x P/E and 12.8x P/BV. The valuations are very expensive for a company that has clocked no growth in the last 3 years! What’s more, the company is demanding an astronomical valuation of 10.8x Price to sales,” stated Aditya Kondawar, Founder, COO, JST Investments. He added that Sona Comstar is an stay clear of for JST Investments because lots of listed ancillaries are offered at 1x Price to sales or under.

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