Sona BLW Precision Forgings Limited IPO

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(i) It is one of India’s leading automotive technology companies, designing, manufacturing, and supplying highly engineered, mission-critical automotive systems and components such as differential assemblies, differential gears, conventional and micro-hybrid starter motors, BSG systems, EV traction motors (BLDC and PMSM), and motor control units to automotive OEMs across US, Europe, India, and China, for both electrified and non-electrified powertrain segments.|

(ii) It has nine manufacturing and assembly facilities across India, China, Mexico, and the USA, of which six are located in India. It is also one of the two largest exporters of starter motors from India.

(iii)  It is one of a few companies globally, with the ability to design high power density EV systems handling high torque requirements with a lightweight design, while meeting stringent durability, performance, and NVH specifications, enabling EV manufacturers to enhance the vehicle range, acceleration and the overall efficiency.

Competitive Strengths
(i)
Leading manufacturers and suppliers
(ii) Strong research and development
(iii) Strong business development with a customer-centric approach.

Objects of the Sona BLW Precision Forgings Limited IPO:

The Offer comprises of Fresh Issue (300 Crores) and Offer for Sale (5250 Crores). The fresh issue of shares will be utilized for following activities. (i) Repayment of borrowings (ii) General corporate purposes

Sona BLW Precision Forgings Limited IPO Details:

Open Date: Jun 14 2021
Close Date: Jun 16 2021
Total Shares: 190721649
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built
Issue Size: 5500 Cr.
Lot Size: 51 Shares
Issue Price: ₹ 285-291 Per Equity Share
Listing At: NSE,BSE
Listing Date: Jun 24 2021

Promoters And Management:

(i) Sunjay Kapur, is the Chairman and Non-Executive Director of the Company. He holds a bachelor's degree in science (business studies) from the University of Buckingham. He has over 21years of experience in the automotive industry. He also served as a director on the board of directors of various companies and was the managing director of Sona Koyo Steering Systems Limited (now JTKET India Limited). He holds membership in various autonomous bodies, such as automotive Component Manufacturers (ii) Vivek Vikram Singh, is the Managing Director and Group Chief Executive Officer of the Company. He holds a bachelor's degree in technology (computer science and engineering) from HBTI, Kanpur, and a post-graduate diploma in management from the Indian Institute of Management, Ahmedabad. He has over 15years of experience, including six years of experience in the automotive industry. Heis inter alga is responsible for overseeing the production of auto components and systems platform electric vehicles and hybrids, capital allocation decisions, external shareholder management at the Company. (iii) Amit Dixit, is a Nominee Director of the Company. He holds a bachelor's degree of technology in civil engineering from the Indian Institute of Technology, Bombay, (where he was awarded the institute silver medal) a master’s degree in science in civil engineering from the Leland Stanford Junior University, and a master’s degree in business administration from Harvard University. He has significant experience in various investments and investment opportunities in India and South Asia. (iv) Ganesh Mani, is a Nominee Director of the Company. He holds a bachelor's degree in technology in mechanical engineering from the Indian Institute of Technology, Bombay. He is currently managing director with the private equity business group of the Blackstone Group in India. Since joining Blackstone in 2011, he has been involved in the execution of several investments at BlackstoneAdvisors India Private Limited and in the evaluation of investment opportunities across sectors in South Asia

Financials of Sona BLW Precision Forgings Limited IPO:

Particulars (in Cr.) 9MFY21 Mar-20 Mar-19 Mar-18
Sales 1,026 1,220 1427 1224
Cost of Material Consumed 470 511 561 505
Change in Inventories -56 2.22 16 -33
Employee Benefits Expense 101 122 123 112
Other Expenses 211 258 313 293
Operating Profit 300 327 414 347
OPM % 29.24% 26.79% 29.01% 28.35%
Other Income 2.6 7.5 5.7 9.1
Interest 2.3 2.68 1.97 2.14
Depreciation 68 78 72 61
Profit before tax 210 227 325 271
Total Tax Exps 55 6.1 113 100
Net Profit 155 221 212 171
NPM % 15.11% 18.11% 14.86% 13.97%
No. of shares 57.2 57.2 57.2 57.2
EPS in Rs 2.7 3.9 3.7 3.0

Comparison With Peers:

Name of the company 3-year Revenue Growth 3-year PAT Growth EBITDA Margin (FY21) ROE  (FY21) Debt to Equity P/E 3 Years Stock Return
Sona BLW  (3 Years) -1% 14% 30% 16% 0.16 73 -
Motherson Sumi 6% -15.00% 8% 8.48% 0.8 76 12%
Varroc 4% -95% 4% NA 0.81 NA -40%
Bosch Ltd -5.00% -22% 12% 5.00% 0.01 97 -15%
Bharat Forge Ltd -2.00% -32% 13% NA 0.9 NA 6%
Mahindra CIE -13% -53.00% 9% 1.00% 0.34 157 -12%
Endurance Technologies 4.36% 20% 16% 15.00% 0.12 40 -2%
Minda Industries Ltd 10% -30% 11% 4.00% 0.53 200 18%
Sundram Fasteners Ltd -2.00% -9% 18% 15.00% 0.27 48 12%

Recommendation on Sona BLW Precision Forgings Limited IPO:

Review and Recommendation of Sona BLW IPO by IZ team is 4/10 1. The sector in which company is operating is struggling from the last 3 years. 2. All the peers have generated no growth or given almost negligible returns to the investors. 3. Issue size is very big. Plus, asking P/E is almost 72, which has left nothing in the hands of investors to earn. 4. Companies that are typically coming to give exit to the investors at high valuation wont give much return to investors.

Registrar of Sona BLW Precision Forgings Limited IPO:

  1. Kfin Technology Private Limited

Company Address:

Sona Enclave Village, Begumpur Khatola, Sector 35, Gurugram, Haryana–122004, India

Discussion on Sona BLW Precision Forgings Limited IPO:

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