Review By on April 26, 2012
The IPO that broke the ice for the fiscal 2012-13 got lukewarm response with around 1.15 times subscription (QIB-1.29, HNI-1.91 and Retail-0.68 times) which is attributed to low ebb of confidence across the band of investors and current market status. Most of the applications have come on the lower price band and thus, it is likely to fix Rs. 120 offer price.
Amidst such scenario, we have now mega IPO from Samvardhana Motherson Financial Ltd. (SMFL) that is floating an IPO for Rs. 1665.00 crore that includes offer for sale from Radha Rani Holdings Pvt. Ltd for Rs. 321.00 crore and fresh issue of Rs. 1344.00 crore. The company is offering equity share of Rs. 10 each within a price band of Rs. 113 - 118 and the issue is opening on 02.05.12 and will close on 04.05.12. With this issue, company is diluting around 35% of post issue capital and the shares will be listed on BSE and NSE. J P Morgan India Pvt. Ltd and Standard Chartered Securities (India) Ltd. are the BRLMs and Link Intime India Pvt. Ltd. Is the registrar to the issue. ICRA has assigned IPO Grade 4 to this IPO indicating 'above average fundamentals' of the company.
Out of the fresh issue funds (Rs. 1344 crore) generated the company will use approx Rs.356 crore for repayment of high cost debts, Rs. 660 crore for strategic investment and Rs. 164 crore for setting up of rear view vision system plant and balance as general corporate needs.
SMFL is a multinational business with manufacturing and design capabilities providing full system solutions to diverse industries. It provides an end-to-end range of design and manufacturing solutions to the automotive customers, including product concept and product design, engineering, manufacturing, sub-assembly and the production of integrated modules. The business portfolio includes wiring harnesses, rearview mirrors, molded plastic parts, injection molding tools, assemblies and modules, elastomer products, cutting tools and thin film coating metals, IT services, design engineering, cabins for off-highway vehicles, HVAC/ air conditioning systems for automobiles, lighting systems, air intake manifolds, air compressors, paint coating equipment, auxiliary equipment for injection molding machines and automotive manufacturing engineering services.
The major customers of the company include the five largest automotive OEM manufacturers in the world, as well as the largest automotive OEM manufacturer in India. It has 90 manufacturing facilities with a presence in 23 countries across the world, including 23 locations outside India and the company is in the process of establishing new manufacturing facilities in India, Brazil and Thailand.
On the performance front the company has shown an average EPS of Rs. 0.24 (on standalone basis) and Rs. 2.30 (on consolidated basis) for the past three years. For first nine months of the current fiscal EPS stands at Rs. 0.52 (on standalone basis) and -Rs. 2.50 (negative) (On consolidated basis). This will worsen on post issue equity with same earnings and thus IPO looks very expensive against ongoing prices for its peer group.
As far as past issue details of BRLMs is concerned and details given in RHP, JP Morgan came with five IPOs and Standard Chartered Securities came with 1 IPO and all of them gave some returns to the investors on debut day.
Although this offer is from a well known Motherson Sumi group that has remarkable performance for its listed venture Motherson Sumi Systems Ltd., this offer is being made at a greedy price.
Remark: High Risk-Low Yield.
Review By on April 26, 2012
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of Samvardhana Motherson Finance Ltd. offers an early investment opportunity in Samvardhana Motherson Finance Ltd.. A stock market investor can buy Samvardhana Motherson IPO shares by applying in IPO before Samvardhana Motherson Finance Ltd. shares get listed at the stock exchanges. An investor could invest in Samvardhana Motherson IPO for short term listing gain or a long term.
Read the Samvardhana Motherson IPO recommendations by the leading analyst and leading stock brokers.
Samvardhana Motherson IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Samvardhana Motherson IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Samvardhana Motherson IPO?"
Our recommendation for Samvardhana Motherson IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Samvardhana Motherson IPO.
The Samvardhana Motherson IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Samvardhana Motherson IPO allotment status to check.
