Sona BLW IPO Analysis

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Basic Details About Sona BLW IPO

Price Band285-291
Bid Lot51 shares
Fresh issue (Amount)300cr
OFS (Amount)5250cr
Fresh issue shares-cr1.03cr
Total issue amount- AT Upper Band5550cr
Post issue Implied Market Cap16974
Post issue (Shares) Cr58.3
Book Runner and Lead Managers: Kotak Investment Banking, Credit Suisse, JM Financial, J.P. Morgan and NOMURA


On 5 July 2019 company acquired 100% equity shares of Comstar and its subsidiaries Hence Pro- forma numbers have to be looked not the restated numbers for Like-to-Like comparison.

Financials – Balance Sheet (PRO FORMA)

Balance sheet
% of Total Assets15.9%15.4%13.4%
Capital WIP82.158.118
% of Total Assets3.8%3.1%1.0%
Total PPE+Capital WIP427342.6264
% of Total Assets19.6%18.5%14.3%
Right of Use+Goodwill on Conso335317.7281
% of Total Assets15.4%17.2%15.3%
Other Intangible assets536.6462.9481
% of Total Assets24.7%25.0%26.1%
% of Total Assets14.1%10.6%10.0%
Trade Receivable417234273
% of Total Assets19.2%12.6%14.8%
Cash and Bank balance27.616761
% of Total Assets1.3%9.0%3.3%
% of Total Liabilities59.9%63.6%68.4%
Borrowings + Lease Liability444.7363179.6
% of Total Liabilities20.4%19.6%9.8%
Trade Payable175100112
% of Total Liabilities8.0%5.4%6.1%
Total Assets/Liabilities217518511841

Financials – P&L

Revenue from Operation156612201428
% Growth28.4%-14.6% 
% of Revenue45.3%42.0%39.4%
Other expenses333259313
% of Revenue21.3%21.2%21.9%
Employee benefit expenses147122124
% of Revenue9.4%10.0%8.7%
Depreciationa and Amortisation977972
% of Revenue6.2%6.5%5.0%
PBT and Exceptional Item314228326
PBT Margin19.2%18.7%22.8%
PAT Margin13.7%18.2%14.9%

Change in Equity Shares

Equity SharesNo of shares (Cr)DATE
As on 31.03.20192.7 
Issued @384.832.2
Buy Back @3140.26
As on 31.03.20204.64
Bonus Issues(11:1)52.52On 10 Feb 2021
As on 31.03.202157.16 

ABOUT Company’s Management

NOTE: In OFS Singapore VII Topco III Pte Ltd is seeling and its shareholding will reduce from 66.28% to 34.18%. Singapore VII Topco III Pte Ltd is an affiliate of funds managed and/or advised by affiliates of the Blackstone Group.

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Sanjay Kapur (Promoter Group) Chairman and Non Executive Director

  • Has 21 years of experience in automotive industry
  • He was the MD of Sona Koyo Steering Systems ltd( now JTKET Ltd)
  • He is also co-chairman of the manufacturing council of Confederation of Indian Industry
  • He is also promoter of Sona Autocomp (which holds 33.1% Post Issue in Sona BLW)

Vivek Vikram Singh (Managing Director and Group Chief Executive officer)

  • Post graduate from IIM Ahemdabad.
  • Was recongnized as one of the India’s 40 under forty hottest business leaders by the Economic Times in 2018

Ganesh Mani (Nominee Director )

  • Currently MD with private equity business group of the Blackstone group in India.

Shradha Suri( Independent Director)

  • Over 20 year experience in automotive Industry.
  • She is the MD of Subros ltd

Venkata Rama Subbu Behara (BVR Subbu)

  • He is an auto industry veteran who has served as the president of Hyundai Motor India and earler held position in Tata Motors
  • Presently a director on the board of directors of KPIT Technology, Greaves Cotton and MTAR Technology.

Pros of Investing in Sona BLW IPO

  • Company is a well globally recognized player in various segments and has Top Global clients.

Table Below Highlighting Product Segment share in overall revenue

  • Company is significantly focusing on EV (Electric Vehicle) segment which is the future (expected to grow at a CAGR of 36% till 2025) and all Global Big players have already announced Big capex and various launches in coming 10 years & currently company derives 14% of revenue in FY21 which was just 1% in FY19 and in last 3 years substantial capex was done in EV as they are aggressively looking EV is the future for them.
  • VW plans to have at least approximately 30% of their portfolio to be BEV(Battery Electric Vehicle) in 2030 or GM has committed $27Bn (1.97 lac cr) to EVs & AVs till 2025 or Ford has indicated that it will invest $11.5 bn(84K cr) through 2022 mainly oriented towards BEVs etc
  • 2030 targets for India indicate that 70% of all commercial passenger vehicles, 30% of private passenger vehicles, 40% of buses, 80% of two-wheeler and 80% of three-wheeler sales would be electric.
  • Company has been continuously increasing its R&D expenditure and the segmental focus which is EV which in itself is at early growing stage hence riding the foreseeable trend.
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NOTE: As at March 31, 2021, company have been awarded 15 development programs for EV systems and components by 10 different customers, of which active production process has commenced for eight programs

Research and Development Expenditure
% of Revenue5.8%3.3%1.7%
15.4% of Companies on roll Manpower in R&D
  • IPO Proceeds will significantly reduce debt and thus Restated EPS is calculated for FY21 and DE ratio becomes very comfortable just at 0.16.
Long Term Borrowings191
Long term lease Liability72
Short term Borrowing (IncludeCurrent maturing Long Term)172
Short Term Lease Liability11
Total Borrowings363
Total Lease Liability83
Total Borrowing+ Lease Liability446
Proceeds used for Paying Borrowings241
Current Finance cost32.5
Finance cost Saved16.5
Savings After Tax12.4
Restated PAT for FY21227.4
Restated EPS for FY214.0
Restated D/E ratio will be0.16
  • Company revenue comes from diversified countries also interesting is company exports to China also that shows the quality of company business although North America, Europe & India are the major regions, also in spite pandemic revenue grew in FY21 and EBITDA margins is good at 28.5%
Revenue from Operation156612201428
% Growth28.4%-14.6% 
  • Company have good experienced quality management(About Management Pg.3)

Cons of Investing in Sona BLW IPO

  • Of 5550cr issue, 5250 is OFS and Singapore VII Topco III Pte. Ltd whic is an affiliate of funds managed and/or advised by affiliates of the Blackstone Group is selling around 18cr share and hence Post IPO there stake will reduce from 66.3% to around 34%…So why a financial investor is selling in Big if so much potential unfolding remains.

Also to be Noted that just 4 months back 11:1 Bonus share was allotted i.e. 11 shares were allotted for every 1 share.

  • Based on the peer comparison company don’t seem to have left room for investors.
  Peer Comparision  PE  PB  EV/EBITDAD/E ratio  ROE
Motherson Sumi736.1616.30.89.0%
Bosch Ltd46.44.7826.80.0110.6%
Sundaram Clyton21.82.506.43.512.4%
Varroc engineering 1.8913.30.8 
Bharat Forge896.4539.20.91.5%
Mahindra EIE701.6714.20.342.0%
Endurance Technology  40.4  5.92  19.6  0.12  16.0%
Minda Industries1008.2130.40.539.0%
Subdaram Fasteners467.4126.10.316.5%
WABCO India1266.5351.45.4%
Industry Average68.15.1524.370.739.2%
Sona Comstar72.812.8038.20.1617.3%
  • Company derives significant % of revenue from Top 10 customers around 79.6% comes from them , Top 3 customers account for 45.4%

Anchor Book

Anchor Book 2497.5cr
Government of Singapore12.60%
Monetary Authority of Singapore3.50%
SBI MF7.10%
Axis MF7.10%
Aditya Birla Sun Life7.10%
Nomura India5.80%
Fidelity Funds5.00%
Goldman Sach4.10%
Thronburg Developing World Fund4.40%

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Arman Nahar

Arman Nahar

C.A. who is a USA CFA L3 candidate | Cleared L1 & L2 | Doing independent equity research since 2016 | Screens stocks for investment | Makes in-depth valuation models | Crafts portfolios.
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