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Sundaram Fin Hold rights issue review (May apply)

Sundaram Finance Holdings Limited Logo

•    A well-known group from the southern region with track records.
•    It follows conservative policy for its functioning.
•    Rights issue is priced at a discount to the current market price.
•    Investors may consider investment for long term rewards.

ABOUT COMPANY:
Sundaram Finance Holdings Ltd. (SFHL) is an automotive sector-focused investment company with investments in 20 portfolio companies of which 15 companies are involved across the automotive manufacturing value chain. Its investments are focused in the automotive space, with current investments in portfolio companies engaged in various aspects of automotive manufacturing including axles, axle housing, wheels and suspension, fuel injection equipment, precision aluminium cast products, iron castings, spare parts and electrical equipment.

Further, several of its portfolio companies are market leaders in their respective segments, such as Brakes India Private Limited, which is amongst the leading suppliers of braking systems in the personal vehicle segment, Wheels India Limited, which is a key player in steel rims/wheels manufacturing as well as a key supplier on air suspension systems, Turbo Energy Private Limited, which is one of the largest turbocharger manufacturers in the domestic market, catering to all major personal vehicle OEMs as well as commercial vehicle players, Axles India Limited, which is a prominent axle housing suppliers, Sundaram Clayton Limited, which is a leading aluminium die-casting company, especially in the commercial vehicle segment, Lucas TVS Limited, which is a key supplier of automotive electrical components such as alternators, starter motors and wiper motors and Delphi TVS Technologies Limited, one of the few large players in the fuel injection system market. (Source: ICRA Report) As per ICRA, Turbo Energy, Honeywell Turbo Technologies India Private Limited ('Honeywell') and Cummins Turbo Technologies Limited ('CTT') together accounted for over 90% of the domestic turbocharger requirement.

SFHL also provides business process outsourcing services in the nature of information technology-enabled services in areas of accounting, insurance, banking, human resources, telecom etc. and administrative, managerial, maintenance, document processing, data entry, reconciliation, training and orientation and other support services to its portfolio companies and to various third parties through Subsidiary.

ISSUE DETAILS:
SFHL is coming out with a rights issue of 71000000 equity shares of Rs. 5 each at a fixed price of Rs. 50 per share to mobilize Rs. 355 cr. The company is issuing the right shares in the ratio of 23 shares for every 49 shares held as on the record date of April 27, 2021. The issue opens for subscription on May 06, 2021, and will close on June 02, 2021. Post allotment, it will be listed on NSE.

The company will be spending Rs. 350 cr. for the financing of the acquisition of an additional shareholding in BILP from ZF and Rs. 5 cr. will be used for general corporate purpose. SFHL will spend approx. Rs. 2.88 cr. for this rights issue proceedings.

The issue is solely lead managed by JM Financial Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue.

Post this issue, the company's current paid-up capital of Rs. 75.55 cr. will stand enhanced to Rs. 111.05 cr. With the right issue pricing, the company is mulling a market cap of Rs. 1110.52 cr., whereas based on LTP the market cap comes to Rs.  1756.84 (as of April 28, 2021 close)

FINANCIAL PERFORMANCE:
On the financial performance front, SFHL has (on a consolidated basis) reported a total income/net profit of Rs.102.65 cr. / Rs. 30.22 cr. (FY19) and Rs. 98.47 cr. / Rs. 29.29 cr. (FY20). For both these fiscals, it has received a share of net profits from its associates to the tune of Rs. 107.24 cr. and Rs. 48.84 cr. respectively. For the first nine months of FY21 (unaudited), it has earned a net profit of Rs. 5.84 cr. on a total income of Rs. 45.85 cr. and has received a share of profit of Rs. 31.22 cr. from associates.  It suffered a setback for FY20 in line with the general trends in the automobile sectors. As on December 31, 2020, it's paid-up capital of Rs. 75.55 cr. is supported by free reserves worth Rs. 1813 cr.

SCRIP MOVEMENT ON NSE:
SFHL turned ex right on April 26, 2021. The scrip closed cum-right at Rs. 76.70 on April 23, 2021, and at Rs. 71.35 as ex-rights on April 26, 2021. It has posted a high/low of Rs. 84.70 / Rs. 37.50 (on an ex-rights basis) and its last traded price (LTP) is Rs. 79.10 per share as of April 28, 2021. Post-ex-right it has traded between Rs. 84.70 and Rs. 69.85 so far. (till April 28, 2021).


Conclusion / Investment Strategy

Though the group follows conservative policy, it is still considered a worthy investment based on its track records. Investors may apply for this rights issue with long term perspectives.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Apr 28, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

The Sundaram Finance Holdings Rights Issue Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Sundaram Finance Holdings Rights Issue worth investing. The Sundaram Finance Holdings Rights Issue Note sets the Rights Issue expectations in systematic way which tells you if Sundaram Finance Holdings Rights Issue good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Sundaram Finance Holdings Rights Issue by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


1 Comments

1. Auto pursa  May 26, 2021 8:14:30 PM
Ipo guruji should I purchase shfl-re shares and go for the rights issue