Tag: sona blw precision forgings

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Tata Motors to Hike CV Prices by 3% in Oct – Top Indian Market Updates

Here are some of the major updates that could move the markets tomorrow:

Tata Motors to hike commercial vehicles prices by 3% in Oct

Tata Motors will raise the prices of its commercial vehicles (CVs) by up to 3%, its third hike in 2023, to offset the residual impact of past input costs. The price hike, effective Oct. 1, will be applicable across its range of CVs. The automaker previously raised prices by 1.2% in January and by 5% in March to ensure its vehicles comply with the new emission norms.

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SBI launches digital opening of NRE/NRO account setup via YONO

State Bank of India (SBI) has introduced a digital facility for Non-Resident Indians (NRIs) to effortlessly open NRE and NRO accounts (both savings and current accounts) through its mobile app YONO. This service is designed for NTB or ‘new to bank’ customers, providing them with ease and efficiency in the account opening process.

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Petromin Corporation signs 3 agreements with HPCL to invest $700 million

Petromin Corporation KSA will invest $700 million in partnership with Hindustan Petroleum Corporation Ltd (HPCL) in three strategic areas. It will invest around $100 million to set up around 1,000 vehicle service centres at HPCL retail outlets in India. Petromin will also invest around $100 million to install and operate up to 5,000 electric vehicle charging units at HPCL-operated stations throughout India.

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NTPC mining arm to explore battery minerals overseas

According to a Reuters report, NTPC’s mining arm will explore overseas sourcing of battery minerals such as lithium, cobalt and nickel. India has been pursuing pacts with other countries to secure key minerals in resource-rich countries such as Australia, Argentina and Chile. The country aims to be a net zero emitter of greenhouse gases by 2070.

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Torrent Pharma looks to partner with CVC Capital to fund Cipla purchase

Torrent Pharmaceuticals Ltd is in advanced negotiations with CVC Capital Partners to form a consortium and raise at least $1.2-$1.5 billion. The fundraise is for its proposed acquisition of Cipla. Torrent is also engaged with Brookfield to raise $1-1.2 billion in mezzanine debt. The company’s founders, the Sudhir and Samir Mehta family, are seeking to dilute equity and create a non-disposable undertaking (NDU) using their shares as collateral for loans.

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India’s net direct tax collections rise over 23% to ₹8.65 lakh crore

According to the Income Tax department, India’s net direct tax collections grew 23.51% to ₹8,65,117 crore till September 16, 2023, in the current financial year (FY24). The provisional figures show net collection figure for the corresponding period in FY23 was ₹7,00,416 crore. This surge can be attributed to a balanced mix of Corporation Tax (CIT) and Personal Income Tax (PIT), which includes Securities Transaction Tax (STT).

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India’s trade deficit widens to $24.16 billion in August

India’s trade deficit in August 2023 surged 17% month-on-month to $24.16 billion. The trade deficit in July stood at $20.67 billion. This rise can be attributed to an 11% increase in goods imports, whereas exports only experienced a modest 6.9% growth during the same period. [Trade deficit is the difference that arises when the amount of imports by a country exceeds its exports.] 

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VA Tech WABAG signs pact with Al Jomaih Energy and Water

VA Tech WABAG Ltd signed a Memorandum of Understanding (MoU) with Al Jomaih Energy and Water (AEW), a developer of energy and water projects in the Middle East. The companies examining collaborative opportunities in water project development across Saudi Arabia and the broader Middle East region.

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Sona BLW Precision concerns over auto workers’ strike in US

Sona BLW Precision Forgings Ltd informed of a strike at the plants of three of its key clients in the United States. United Auto Workers (UAW) in the US went on strike at some of the plants of three original equipment manufacturers (OEMs) on September 15, 2023. The company added that it supplies to these three OEMs in the US, directly or indirectly.

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HFCL secures ₹1,015 crore order from Madhya Pradesh govt

HFCL secured a ₹1,015 crore order from the Madhya Pradesh Jal Nigam for providing engineering, procurement and construction (EPC) services. The order involves a provision for laying optical fibre cables on critical routes and execution of a multi-village drinking water supply network in the Sheopur district of the state. The project will be executed by the company in 24 months in collaboration with Khilari Infrastructure Pvt. Ltd.

Read more here. 

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Market News Top 10 News

Adani Lenders Consider $750 Million Loan For Ambuja Cements – Top Indian Market Updates

Here are some of the major updates that could move the markets tomorrow:

Adani lenders consider up to $750 million loan for Ambuja debt

Barclays Plc, Deutsche Bank AG and Standard Chartered Plc are in talks to lend between $600 million and $750 million collectively to Adani Group. The loan is part of discussions to refinance the debt taken to fund its purchase of Ambuja Cements Ltd. The loan would be syndicated. If executed, the loan of as much as $750 million would be part of that broader refinancing. The talks haven’t yet concluded, and the amounts could still change. 

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Bajaj Finserv Q1 Results: Net profit rises 48% YoY to ₹1,943 crore

Bajaj Finserv reported a 48.4% YoY rise in consolidated net profit to ₹1,943 crore for the quarter ended June (Q1 FY24. The company’s net profit in the same quarter last year was ₹1,309 crore. Its operating revenue also rose 47% YoY to ₹23,280 crore during the same period. Its subsidiary, Bajaj Finance reported the highest-ever quarterly increase in its customer franchise of 3.84 million and the highest-ever new loans booked of 9.94 million in Q1FY24.

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Sona BLW Precision Q1 Results: Net profit rises 47% to ₹112 crore

Sona BLW Precision reported a 47% YoY increase in consolidated net profit to ₹112 crores for the June quarter (Q1 FY24). Its revenue from operations rose 25.17% YoY to ₹731 crore during the same period. The company’s board approved an investment of ₹99.7 crores for capacity expansion of its Chennai plant from 4 lakh to 6 lakh electric vehicle traction motors. It also decided to add a new capacity of 5 lakh units of printed circuit board assembly by 2024-2025.

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US FDA concerns in Lupin’s Goa, Pithampur facilities are now resolved

Drug Ltd has received correspondence from the US Food & Drug Administration (USFDA) that it has now addressed the concerns raised in the warning letter for its facilities in Goa and Pithampur Unit-2, Indore. This comes after the satisfactory evaluation of the corrective actions taken by Lupin. The actions were in response to the Warning Letter issued by the US FDA on November 6, 2017.

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IEX Q1 Results: Net profit rises 10% YoY to ₹76 crore

Indian Energy Exchange Ltd (IEX) reported a 10% YoY increase in consolidated net profit to ₹10 crore for the June quarter (Q1 FY24). Its total income stood at ₹127 crore during the same period, up 12.3% YoY. EBITDA grew marginally to ₹82 crore in Q1FY24 from ₹81 crore in Q1FY23. Recently, IEX witnessed a steep fall in its share price that could be related to the Central Electricity Regulatory Commission’s plan to initiate market coupling.

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Cipla promoters in talks to sell part stake to private equity firms

According to a CNBC TV18 report, Cipla’s promoters are in talks with private equity firms to sell a part of their total holding in the company. At present, The promoters own a 33.47% stake in the company. An investment bank has been hired to advise on the deal. Furthermore, Private Equity (PE) firms like Blackstone and Baring Asia are amongst others that are in talks to explore a deal. 

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Bharat Forge receives approval to participate in potential defence programs in future

Bharat Forge Ltd has received approval to participate in potential defence programs in future. The license is granted by the Ministry of Home Affairs (MCA) under Arms Rules, 2016. The approval is for small arms and ammunition. Bharat Forge serves several sectors including Automotive, Railways, Aerospace, Marine, Oil & Gas, Power, Construction and Mining. It is among the largest forging companies globally.

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L&T says it will pay back to shareholders if the cash surplus is much higher than requirement

Larsen & Toubro will return money to shareholders if the cash surplus is much higher than the company’s requirements. L&T’s CFO, R Shankar Raman’s declaration of the company’s willingness to return surplus cash to shareholders showcases Larsen & Toubro’s commitment to financial prudence and shareholder value. 

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Kalpataru Projects International, subsidiaries bag orders worth ₹2,261 crore

Kalpataru Projects International and its subsidiaries have bagged orders worth ₹2,261 crore. These new contracts include orders in the T&D (transmission and distribution) business of ₹2,036 crore in overseas markets. Besides, it also got a cross-country oil & gas pipeline project in India of ₹225 crore. It is currently executing projects in over 30 countries and has a presence in 70 nations.

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BPCL still in talks for Russian oil deal, discounts narrow

Bharat Petroleum Corp is still in talks with Russian oil major Rosneft to buy oil under a term deal. According to a Reuters report from last month, BPCL is in talks to buy up to 6 million metric tons of Russian oil under a term deal with Rosneft. Indian refiners have been snapping up discounted Russian oil since many other countries imposed sanctions on Moscow after it invaded Ukraine. The discounts make Russian oil cheaper than similar grades from the Middle East.

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Editorial

Sona Comstar IPO: All You Need to Know

sona camstar

The IPO frenzy has returned to the Indian stock markets. Sona BLW Precision Forgings, one of the leading auto components manufacturers in the world, had launched its three-day initial public offering (IPO) on June 14. In this article, we take a closer look into the company and its IPO.

Company Profile – Sona BLW Precision Forgings

Sona BLW Precision Forgings Ltd (SBPFL) is an automotive technology company headquartered in Gurugram, Haryana. It was incorporated in 1995. The company is widely known as Sona Comstar. It is primarily engaged in the design, manufacturing, and supply of mission-critical automotive systems and components in India and around the globe. Their products include differential assemblies, gears, conventional and micro-hybrid starter motors, etc. The company also manufactures a range of electric vehicle (EV) traction motors. Hence, they provide essential components required for the production of all types of vehicles.

Last year, Sona Comstar secured its position as one of the top 10 global players in the differential bevel gear segment. It is also the largest exporter of starter motors in India. According to a recent report by Ricardo plc (a consultancy firm), Sona Comstar obtained a global market share of 5% for differential bevel gears and 3% for starter motors in 2020. They also secured an impressive global market share of 8.7% for BEV differential assemblies (used in EVs). 

The company caters to the rising demands of some of the largest manufacturers of passenger vehicles (PV), commercial vehicles (CV), and tractors in the world. Their client list includes Ashok Leyland, Volvo, Mahindra & Mahindra, Maruti Suzuki, Daimler, and Renault Nissan.

SBPFL supplies its products across India, Europe, China, and the United States. Close to 95% of its total revenue comes from sales in overseas markets. They own and operate 9 manufacturing and assembly units across India, China, the US, and Mexico. Sona Comstar is also well known for its extensive Research & Development (R&D) activities. The company is run by a set of highly experienced managers and promoters, led by Sunjay Kapur. He has over 21 years of experience in the auto industry. They are backed by US-based investment firm Blackstone Group.

About the IPO

In May 2021, Sona BLW Precision Forgings received approval from SEBI to float an initial public offering (IPO). The public issue will open on June 14, 2021, and close on June 16, 2021. The total issue size of the IPO is Rs 5,550 crore. This comprises a fresh issue of equity shares aggregating up to Rs 300 crore. It also includes an offer for sale (OFS) of up to Rs 5,250 crore by an existing shareholder— Singapore VII Topco III Pte. Ltd. The company will issue a total of ~19.07 crore shares. The price band for the IPO has been fixed at Rs 285-291 per share.

Individual investors can bid for a minimum of 51 equity shares (1 lot), which will amount to Rs 14,941. The maximum number of shares that can be applied by a retail investor is 663 equity shares (or 13 lots). Thus, the maximum amount one can invest in the IPO is Rs 1,92,933. But take care not to apply for more than 1 lot, as your capital may get blocked for no reason if the IPO is oversubscribed.

Sona Comstar will utilise the net proceeds from the IPO for two main purposes. The main priority is to make repayment or pre-payment of its existing debts. The company will spend Rs 241.12 crore from the IPO proceeds to reduce debt. The remaining amount will be used for general corporate purposes. The total promoter holding in the firm will reduce from 100% to 67.30% post the successful completion of the IPO.

Financial Performance

From the table, it is clear that Sona Comstar has posted strong financial growth over the past few years. Its total income has grown at a CAGR of 22.9% between FY18-FY21. In FY20, the company secured the highest operating EBITDA margin, profit margin, Return on Capital Employed (ROCE), and Return on Equity (ROE) when compared to the top 10 publicly listed auto component manufacturers in India.

The net profit for the financial year 2020-21 (FY21) declined by 40.2% YoY to Rs 215.17 crore. This was mainly due to higher provisioning for depreciation and an increase in the cost of raw materials amidst the Covid-19 pandemic. Earnings Per Share (EPS) came down to Rs 3.76 in FY21, compared to Rs 7.06 in FY20. However, the company’s total income increased by 50% YoY to Rs 1,565.64 in FY21. As mentioned earlier, a majority of its revenues come from large automakers from around the globe. The high demand for their innovative products (especially those for electric vehicles) has been a key factor for revenue growth. 

The company’s ROCE stands at 35%, which is very high when compared to its competitors. This means that for every Rs 100 worth of capital employed, Sona Comstar earns Rs 35 on it. The Return on Net Worth (RoNW) stood at 30.6% in FY20 and declined to 16.5% in FY21. RoNW shows how much profit a company generates from the investments made by equity shareholders. 

Risk Factors

  • The company’s business is highly dependent on the performance of the automotive sector globally. Any drastic changes in conditions affecting its key markets (US, Europe, India, and China) could adversely impact their overall operations and financial performance.
  • The revenue derived from Sona Comstar’s top 10 customers represents around 79.9% of its overall sales income (as of December 31, 2020). The loss of any one of these customers or even a reduction in purchases by them will negatively affect financial results.
  • Like most other companies, the Covid-19 pandemic caused a severe impact on Sona Comstar’s operations. All manufacturing and assembly facilities were shut worldwide due to strict lockdowns. The company had also experienced a sharp decline in overall demand for its products. Such health threats could adversely affect its business/financial growth.
  • Sona Comstar has admitted that it may not be successful in implementing its growth strategies, including the strategy to capture opportunities in the highly promising electric vehicle (EV) market. Their R&D segment could fail to develop new and improved products on time or may exceed estimated budgets.
  • The company faces a very high level of competition in both the domestic and international markets. When compared to peers, it may not be able to launch new products based on rapidly-changing customer demands or requirements.  

IPO Details in a Nutshell

The finalisation of the basis of allotment is likely by June 21. Kotak Mahindra Capital, Credit Suisse Securities, JP Morgan India, JM Financial, and Nomura Financial Advisory & Securities have been appointed as the book-running lead managers to the public issue. Sona BLW Precision Forgings had filed draft papers for its IPO in February 2021. You can read it here.

Ahead of the IPO, Sona Comstar raised Rs 2,497.5 crore from anchor investors on June 11. The investors include the Government of Singapore Investment Corp (GIC), Nomura Asset Management, Morgan Stanley, RWC Funds, Goldman Sachs Asset Management, etc. 

Conclusion

The global auto components industry is growing at a fast pace. According to a report from Automobile Component Manufacturers Association (ACMA), the Indian auto components industry is expected to grow to a $200 billion (~Rs 14.50 lakh crore) market by 2026. Sona BLW Precision Forgings has transformed into one of the best-performing and innovative companies in this industry. Even though most of the firms in the auto sector suffered from the Covid-19 pandemic, SBPFL was able to post higher revenues. It has changed its focus towards delivering green technologies and launching components suitable for the future of mobility— EVs. This indicates that one could invest in the company based on its future growth prospects.

Sona Comstar will be directly competing with major players such as Motherson Sumi Systems, Sundaram Clayton, Bosch Ltd, Mahindra CIE, Sundaram Fasteners, and many more.

Before applying for Sona Comstar’s IPO, I will personally wait to see if the portion reserved for institutional investors gets oversubscribed. Due to its impressive track record, the company is expected to attract significant investor participation. As always, do consider the risks associated with this company and come to your own conclusion.

What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.