SONA BLW PRECISION FORGING LIMITED

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.

SONA BLW PRECISION FORGING LIMITED
Offer period Bid/Offer Opens On: Monday, 14th June, 2021
Bid/Offer Closes On: Wednesday, 16th June, 2021
Issue Details Fresh Issue of Equity Shares aggregating up to Rs. 300 Cr.
Offer for sale of Equity Shares aggregating up to Rs. 5250 Cr.
Issue Size(in Crore) Rs. 5550 Cr.
Price Band Rs. 285 - 291
Bid Lot 51 shares and in multiple thereof
QIB 50% of the net offer ( Rs. 4,162.50 Cr.) 
NIB 15% of the net offer (Rs. 833.50 Cr.)
Retail 10% of the net offer(Rs. 555 Cr.)

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