PRICE BAND RS
113-118.
ISSUE OPEN / CLOSE
02-05-12 / 04-05-12.
IPO GRADE 4 BY ICRA
BRLM - J P MORGAN, STANDARD CHARTERED
PROMOTERS - VIVEK
CHAAND SEHGAL, RENU SEHGAL AND LAKSH VAAMAN SEHGAL.
BACKGROUND.
SMFL undertakes the design and manufacturing solutions,
to the automotive industry, through subsidiaries and joint ventures with
partners. By virtue of being a holding
company (in the case of subsidiaries) or a joint venture partner, the share
capital of such subsidiaries and joint ventures is held by the Company. SMFL is an integrated design and
manufacturing group providing full system solutions to diverse industries. The principal focus is on the automotive
industry, globally and in India. Through a combination of organic growth and
acquisitions, MSFL now has multinational business with manufacturing and design
capabilities as well as customers spread across multiple geographies. Within the automotive industry, the group is
one of the largest manufacturers of exterior rear view vision systems in the
world.
The products manufactured by the group include:
• Rear view vision systems;
• Wiring harnesses;
• Polymer processing, including assemblies and bumpers,
cockpit assemblies and door trims,
• Elastomer processing;
• Modules, such as automotive lighting products and
heating, ventilation and air-conditioning systems;
• Metal working, including cutting tools, broaches, bi metal band-saw blades and gear cutting tools and thin film coating metals;
• Cabins for off-highway construction and agricultural
vehicles;
• Refrigeration systems;
• Manufacturing
support, including air
compressors, paint coating
equipment and auxiliary
equipment for injection molding
machines.
The manufacturing
locations are
located close to major
automotive manufacturers in
order to
facilitate supplies to the
customers, and the group has 120
manufacturing facilities, including 48 manufacturing facilities outside India,
with a presence in 25 countries across the world.
The major customers include the Volkswagen group, BMW,
Daimler, Renault Nissan, Ford India, Volvo Car Corporation, Maruti Suzuki, Tata
Motors, Honda Siel Cars, Toyota Kirloskar Motor and
Fiat India
Automobiles. The 10 largest automotive
OEM manufacturers in the world are group’s customers.
OBJECTS OF THE IPO:
Samvardhana Motherson IPO intends to raise Rs 1344 CR.
The funds intended to be used for the following purposes. This is apart from
Offer For Sale
proceeds (Rs 321Cr)
RS IN CRORES
PURPOSE
|
AMOUNT
|
1. Funding per-payment and repayment of debt
facilities availed by the company and certain of its Subsidiaries.
|
338.50
|
2.Funding
strategic investments in
Samvardhana Motherson Polymers
Joint Venture, and Samvardhana Motherson Holding,
the Subsidiary of the company
|
627.50
|
3. Funding investments in rear-view vision systems business
|
156.00
|
4. General corporate purposes
|
222.00
|
5.Total
|
1344.00
|
FINANCIALS RS
IN CRORES
|
31-3-10
|
31-3-11
|
TOTAL INCOME
|
5061.20
|
5716.50
|
PAT
|
74.40
|
167.65
|
EPS
|
2.10
|
2.90
|
For the 9 months ended 31-12-11, the company reported
a total income of Rs 6025cr and loss of Rs 129cr.
NAV as on 31-12-11 is Rs 30.
Average RONW in the last 3 years is just 8%.
STRENGTHS:
Global customer base and strong relationships with
major automotive OEMs.
Market leadership position in exterior rear view
vision systems.
Long term partnerships
and collaborations with
global technology leaders,
facilitating access to
cutting-edge Technology.
Wide range of capabilities, enabling us to provide
end-to-end solutions to our customers.
Global manufacturing
footprint arising from
our philosophy of
establishing production facilities
close to the Customers.
MATTERS OF CONCERN:
- Rs 1600Cr plus fund raising programme has not
been appraised by any institution.
- IPO proceeds identified, may
not result in actual growth
of the business, increased profitability or an increase
in the value of business.
- GROWTH in the past has come from inorganic
transactions such as acquisitions and joint ventures.
·
Radha Rani Holdings - The promoter of Radha Rani
Holdings is JSRR Holdings a company incorporated under the laws of Mauritius. JSRR
Holdings is wholly owned and controlled by JBJ Development
Inc., a company incorporated under the laws of British Virgin
Islands. JBJ Development Inc.
is wholly owned
and controlled by
JBJK Growth Trust, a
discretionary irrevocable trust established under the
laws of British Virgin Islands.
The trustee of JBJK Growth Trust is Pollux Trustee Services Limited; a
company incorporated under
the laws of
Switzerland. The board of directors of Radha Rani Holdings comprises: Vivek
Chaand Sehgal, Juliana Kassim and Kok Yin Keong Eddy.
- The Company
intends to utilize a portion
of the Net Proceeds to fund
the pre-payment and repayment of debt facilities availed
by SMF Cyprus, SMH Mauritius
and MATS, its Subsidiaries. The Company also intends
to utilize a
portion of the
Net Proceeds for
funding strategic investments in SMPL, its Joint Venture, and SMH
Mauritius, its Subsidiary. Such investments may not create any assets for
the Company and would instead be utilized for the purposes. The Company
may, therefore, not receive any immediate benefit from such investments.
- The company lacks corporate governance.
- The company had negative cash flows in the past.
- The average cost of acquisition of shares by promoters as follows;
o
Vivek Chaand Sehgal (117, 103,476) Rs 6.28.
o
Renu Sehgal (109, 825,286) Rs 10.05.
o
Laksh Vaaman Sehgal (105,014,384) Rs 7.27.
VALUATION AND RECOMMENDATIONS:
For the 9 months
ended 31-12-11, the company reported a total income of Rs 6025cr and loss of Rs
129cr. For FY12, the loss could be around Rs 200cr. The company post issue will
have equity around Rs 593cr. Considering
the Samvardhana demands a PE multiple of 10, the company should report a net
profit after tax of Rs 590cr in FY13, which is unlikely. The funds are intended
for reduction / prepayments of debt, investments in joint ventures and not for
capacity expansion. One of the promoters is also part selling his stake in the
offer for sale. It will take another year or two for the company to consolidate
its operation and report decent bottom line.
AVOID THE IPO.
