Monday, April 23, 2012

Samvardhana Motherson Finance IPO

Samvardhana Motherson Finance IPO
Samvardhana Motherson Finance (SMFL), a component supplier to automotive industry, is launching its IPO of a fresh issue of Rs 1,413 crore and an offer for sale of Rs 337.5 crore by Radha Rani Holdings Pte limited. The issue includes a reservation of up to 5% of the issue size for eligible shareholders. Promoters (Sehgal family) except Radha Rani Holdings hold more than 71% stake in the company. The company holds 36.3% stake in Motherson Sumi Systems Limited.

Samvardhana is an integrated design and manufacturing company providing full system solutions to diverse industries. Its main focus is the automotive industry, wherein it supplies components to automotive original equipment manufacturers.

The IPO shall open on 2 May, 2012 and shall close on 4 May, 2012. The company has fixed the price band of the IPO at Rs 113 to Rs 118 per share.

The company intends to use the proceeds from the IPO for funding pre-payment and repayment of debt facilities availed by company and its subsidiaries (with Rs 356 crore); funding strategic investments (with an outlay of Rs 660 crore) and funding investments in rear-view vision systems business (with cost of Rs 164 crore).

Standard Chartered Securities (India) Limited and JP Morgan India Private Limited are book running lead managers to the issue. Link Intime India Private Limited is the registrar.

Recommendation:

ICRA has assigned grade 4 to the IPO indicating above average fundamentals. The company is currently loss-making and has a high debt of Rs 39.2 billion due to large acquisitions made in Europe, where it has a substantial exposure and high single client concentration. We would not recommend investing in this IPO.

Subscription:

Samvardhana Motherson Finance IPO did not get good response from investors so the issue has been withdrawn.


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