Sona Comstar IPO opens today: Should you subscribe?

Sona Comstar IPO: Should you subscribe

Sona BLW Precision Forgings (Sona Comstar) IPO opens for subscription today. Sona Comstar is an automotive technology company and is backed by Blackstone. The company has a strong product portfolio, expected growth potential in electric vehicle (EV) segment, sound research & development (R&D) base, healthy financials, competitive edge and sound global clientele.

IPO details

Size of IPO : ₹5,500 crore IPO, comprising fresh issue of ₹300 crore and offer for sale of ₹5,250 crore by Singapore VII Topco III

Subscription dates : 14 June 2021 to 16 June 2021

Price Band : ₹285-₹291 per share

Lot Size : 51 shares per lot

Value of 1 lot : ₹14,841 at the upper price range of ₹291 per share

Maximum lots per person : A retail investor can apply for 13 lots. This would cost ₹192,933.

The proceeds of the IPO will be used for  repaying debt of Rs 241.12 crore and general corporate purposes.

What do the experts say about Sona Comstar IPO?

Sona Comstar provides an exciting play on electrification and possesses healthy financial strength (around 28 percent margins, around 20 percent RoCE-return on capital employed) but valuations proposed are rich (around 74x P/E on FY21 basis). Nevertheless, we believe the company offers a good investment case on the back of strong growth prospects,” ICICI Direct reasoned.

“However if we compare it with EV-focused global peer, it is at discount. Thus, considering the growth potential in the EV segment and the company’s product portfolio spanning over all types of electrified power trains, we assign ‘subscribe for long term’ rating for the issue,” said the Choice Broking.

Financials of Sona Comstar

For the FY21 (nine month period ended December 2020), consolidated sales were at Rs 1,566 crore with EBITDA at Rs 441 crore (margins of around 28 percent) and PAT at Rs 215 crore. The chief product lines include differential gears, differential assemblies, micro hybrid starter motors and conventional starter motors. They contributed 27.8%, 17.6%, 26.7% and 23.8% to sales respectively.

Verdict

At the upper price band of ₹291, the Sona Comstar IPO is a bit expensive. However, considering the strong financials and the unique advantages, we advise that one should SUBSCRIBE to this issue as it has the potential to generate wealth.

To apply for the IPO, click here.

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