Please refer to important disclosures at the end of this report
1
Sona BLW Precision Forgings (Sona Comstar), a technology and innovation driven
company, derives ~40% of its revenues from high growth areas like Battery Electric
Vehicles (BEV) and Hybrid Vehicles. It is among the top 10 players globally for
differential bevel gears and for starter motors for the PV segment. It had 5% market
share for differential bevel gears, 3% for starter motors and 8.7% for BEV
differential assemblies. They have a diversified customer base across the globe with
75% of their income (sale of goods, FY21) coming from end-use in overseas markets.
Positives: (a) One of the leading manufacturers and suppliers to global EV markets
(b) One of the leading global companies and gaining market share, diversified
across key automotive geographies, products, vehicle segments and customers (c)
Strong research and development and technological capabilities in both hardware
and software development (d) Strong business development with customer centric
approach. (e) Consistent financial performance with industry leading metrics.
Investment concerns: (a) Business is dependent on the performance of the
automotive sector globally, including key markets such as US, Europe, India, and
China. (b) Negative publicity about the brand, or inability to protect any of the IPs,
including misappropriation, infringement could impact the business. (c) Business
largely depends upon the top ten customers and the loss of such customers or a
significant reduction in purchases by such customers will have a significantly
adverse impact on the business.
Outlook & Valuation: Sona Comstar is present in the right areas and can be a
major beneficiary of shift in focus of Global OEM’s towards EVs over the next
decade. As per industry reports, Sona Comstar is among handful of companies in
the world with strong motor and driveline capabilities. We believe that the company
can maintain strong growth rates from its current base given higher salience of
revenues from BEVs vs. industry. Ramp-up of business by select Global OEMs with
EV offerings provides evidence while increasing avg. realization per vehicle (ICE vs.
BEV) would drive top-line growth. The upper end of ` 291 implies FY21 P/E of
~75.2x which is in line with other Indian Auto Component companies that have
lower top-line growth, margins and return ratios vs. Sona Comstar. Hence, we
recommend “SUBSCRIBE” on the Issue.
Key Financials
Y/E March (` cr)
FY2019
FY2020
FY2021
Net Sales
699.2
1,038.0
1,566.3
% chg
-
48.4
50.9
Net Profit
173.2
360.3
215.2
% chg
-
108.1
-40.3
EBITDA (%)
28.6
23.3
28.2
EPS (Rs)
62.5
75.5
3.8
P/E (x)
4.7
3.9
77.5
P/BV (x)
4.6
1.2
12.8
ROE (%)
99.7
30.6
16.5
ROCE (%)
53.2
10.9
18.9
EV/EBITDA
4.6
6.4
38.4
EV/Sales
1.3
1.5
10.8
Source: Company, Angel Research
SUBSCRIBE
Issue Open: June 14, 2021
Issue Close: June 16, 2021
Offer for Sale: Rs. 5250cr
QIBs 75% of issue
Non-Institutional 15% of issue
Retail 10% of issue
Promoters 67.3%
Others 32.7%
Fresh issue: Rs. 300 cr.
Issue Details
Face Value: Rs 10
Present Eq. Paid up Capital: Rs 573.0 cr
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: Rs 583.3 cr
Issue size (amount): Rs 5550 cr
Price Band: Rs 285-291
Lot Size: 51 shares and in multiple thereafter
Post-issue mkt. cap: *Rs 16630 cr - **Rs 16974 cr
Promoters holding Pre-Issue: 100%
Promoters holding Post-Issue: 67.3%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Sona BLW Precision Forgings Limited
f
IPO Note
June 11, 2021
Sona Comstar Ltd | IPO Note
June11, 2021
2
Company background
Incorporated in October 1995, Sona BLW Precision Forgings Limited is one of
India’s leading automotive technology companies, designing, manufacturing, and
supplying highly engineered, mission critical automotive systems and components.
Its components include differential assemblies, differential gears, conventional and
micro-hybrid starter motors, BSG systems, EV traction motors (BLDC and PMSM)
and motor control units. It supplies its automotive OEMs across US, Europe, India,
and China, for both electrified and nonelectrified powertrain segments. Company
has been gaining global market share across products to reach a share of
approximately 5.0% for differential bevel gears, 3.0% for starter motors and 8.7%
for BEV differential assemblies, in calendar year 2020. It has nine manufacturing
and assembly facilities across India, China, Mexico, and USA, of which six are in
India, from where it supplies products to six out of the top ten global PV OEMs,
three out of the top ten global CV OEMs and seven out of the top eight global
tractor OEMs by volume.
It is a technology and innovation driven company. With a strong focus on research
and development (“R&D”), it is among one of a few companies globally, with the
ability to design high power density EV systems handling high torque requirements
with a lightweight design, while meeting stringent durability, performance and
NVH specifications, enabling EV manufacturers to enhance the vehicle range,
acceleration, and the overall efficiency.
Its total operating income has grown at a CAGR of 10.9% from Fiscal Years 2016
to 2020, as compared to the average CAGR of 8.1% for the top ten listed auto-
component manufacturers in India. For Fiscal Years 2019, 2020 and 2021, it has
EBITDA of ₹4,122.43 million, ₹3,253.55 million, and ₹4,410.16 million
amounting to EBITDA margin of 28.9%, 26.7% and 28.2%, respectively, average
ROE of 35.6%, 35.2% and 36.4%, respectively, and ROCE of 40.3%, 29.0% and
34.8%, respectively.
Issue details
The issue size is ` 5550cr, which comprises of fresh issues of up to `300 crore &
offer for sale of ` 5250cr in the price band of `285-`291 per share.
Pre and post IPO shareholding pattern
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
57,29,80,560
100.0
39,25,68,189
67.3
Public
0
0.0
19,07,21,649
32.7
Total
57,29,80,560
100.0
58,32,89,838
100.0
Source: Company, Angel Research & RHP.
Objectives of the Offer
Repayment and pre-payment of identified borrowings in full availed by the
Company; and
General corporate purposes
Sona Comstar Ltd | IPO Note
June11, 2021
3
Key Management Personnel
Sunjay Kapur is the Chairman and Non-Executive Director of the Company. He
holds a bachelor’s degree in science (business studies) from the University of
Buckingham. He has over 21 years of experience in the automotive industry. He
also served as director on the board of directors of various companies and was the
managing director of Sona Koyo Steering Systems Limited (now JTKET India
Limited).
Vivek Vikram Singh is the Managing Director and Group Chief Executive Officer of
the Company. He holds a bachelor’s degree in technology (computer science and
engineering) from HBTI, Kanpur and a post graduate diploma in management
from the Indian Institute of Management, Ahmedabad. He has over 15 years of
experience, including six years of experience in the automotive industry
Amit Dixit is a Nominee Director of the Company. He holds a bachelor’s degree of
technology in civil engineering from the Indian Institute of Technology, Bombay,
(where he was awarded the institute silver medal) a master’s degree in science in
civil engineering from the Leland Stanford Junior University and a master’s degree
in business administration from Harvard University. He has significant experience
in various investments and investment opportunities in India and South Asia.
Ganesh Mani is a Nominee Director of the Company. He holds a bachelor’s
degree of technology in mechanical engineering from the Indian Institute of
Technology, Bombay. He is currently managing director with the private equity
business group of the Blackstone Group in India.
Sona Comstar Ltd | IPO Note
June11, 2021
4
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2019
FY2020
FY2021
Total operating income
699.2
1,038.0
1,566.3
% chg
-
48.4
50.9
Total Expenditure
499.2
795.7
1,125.3
Cost of materials consumed
192.84
442.42
709.48
Changes in inventories & WIP
12.22
3.18
-64.17
Employee benefits expense
49.00
102.73
147.45
Other expenses
245.17
247.38
332.53
EBITDA
200.0
242.3
441.0
% chg
-
21.1
82.0
(% of Net Sales)
28.6
23.3
28.2
Depreciation& Amortization
31.0
67.1
96.9
EBIT
169.0
175.2
344.1
% chg
-
3.6
96.4
(% of Net Sales)
24.2
16.9
22.0
Finance costs
17.8
26.0
32.5
Other income
76.6
5.8
2.3
(% of Sales)
10.9
0.6
0.1
Recurring PBT
227.8
155.0
313.9
% chg
-
-32.0
102.6
Exceptional item
-
232.1
-13.9
Tax
54.6
26.7
84.8
PAT (reported)
173.2
360.3
215.2
% chg
-
108.1
-40.3
(% of Net Sales)
24.8
34.7
13.7
Basic & Fully Diluted EPS (`)
62.5
75.5
3.8
Source: Company, Angel Research
Sona Comstar Ltd | IPO Note
June11, 2021
5
Consolidated Balance Sheet Statement
Y/E March (` cr)
FY2019
FY2020
FY2021
SOURCES OF FUNDS
Equity Share Capital
27.7
47.7
573.0
Other equity (Retained Earning)
146.1
1,130.2
730.9
Shareholders’ Funds
173.8
1,177.9
1,303.9
Total Loans
114.6
261.4
305.2
Other liabilities
29.2
167.7
206.8
Total Liabilities
317.7
1,607.1
1,815.9
APPLICATION OF FUNDS
Property, plant and equipment
178.4
284.5
344.9
Capital work-in-progress
13.2
58.1
82.1
Right-of-use assets
40.5
141.9
159.3
Goodwill
-
175.8
175.8
Other intangible assets
72.4
462.9
536.6
Intangible assets
-
31.5
1.1
Current Assets
1,312.5
631.8
820.9
Inventories
67.8
196.2
305.6
Trade receivables
152.1
233.6
417.0
Cash and cash equivalents
0.2
105.0
24.9
Bank balances
25.4
62.3
2.6
Loans
0.0
0.5
1.5
Other financial assets
3.2
0.5
15.2
Other current assets
13.0
33.6
54.2
Asset for Disposal
1,050.7
-
-
Current Liability
1,314.9
243.6
358.9
Net Current Assets
-2.4
388.2
462.1
Other Non-Current Asset
15.7
64.1
54.1
Total Assets
317.7
1,607.1
1,815.9
Source: Company, Angel Research
Sona Comstar Ltd | IPO Note
June11, 2021
6
Consolidated Cash flow
Y/E March (`cr)
FY2019
FY2020
FY2021
Operating profit
200.89
264.77
402.59
Net changes in working capital
43.68
16.38
-207.05
Cash generated from operations
244.6
281.2
195.5
Direct taxes paid (net of refunds)
-49.41
-27.81
-52.82
Discontinued operations
-40.56
0.00
0.00
Cash flow from operating activities
154.6
253.3
142.7
Payments for acquisition
-141.769
-212.06
-218.937
Proceeds from sale
0.367
0.119
0.907
Others
(21.9)
(742.3)
62.0
Cash Flow from Investing
204.1
(954.2)
(156.1)
Proceeds from short term borrowings
3.959
25.699
29.852
Proceeds from long term borrowings
34.318
160.755
71.757
Repayment of long term borrowings
-53.476
-37.366
-40.797
Repayment of deferred payment
-0.157
-8.642
-1.247
Repayment of lease liabilities
-2.331
-5.688
-9.134
Others
-16.019
632.066
-117.13
Cash Flow from Financing
(346.1)
766.8
(66.7)
Inc./(Dec.) in Cash
12.6
66.0
(80.0)
Opening Cash balances
26.4
39.0
105.0
Closing Cash balances
39.0
105.0
24.9
Source: Company, Angel Research
Key Ratios
Y/E March
FY2019
FY2020
FY2021
Valuation Ratio (x)
P/E (on FDEPS)
4.7
3.9
77.5
P/CEPS
4.0
3.3
53.4
P/BV
4.6
1.2
12.8
EV/Sales
1.3
1.5
10.8
EV/EBITDA
4.6
6.4
38.4
Per Share Data (Rs)
EPS (Basic)
62.5
75.5
3.8
EPS (fully diluted)
62.5
75.5
3.8
Cash EPS
73.6
89.5
5.4
Book Value
62.7
246.7
22.8
Returns (%)
ROE
99.7
30.6
16.5
ROCE
53.2
10.9
18.9
Turnover ratios (x)
Receivables (days)
79.4
82.2
97.2
Inventory (days)
35.4
69.0
71.2
Payables (days)
-
-
-
Working capital cycle (days)
114.8
151.2
168.4
Source: Company, Angel Research
Sona Comstar Ltd | IPO Note
June11, 2021
7
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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