Monday, April 30, 2012

10 REASONS WHY ONE SHOULD NOT EVINCE INTEREST IN SAMVARDHANA MOTHERSON IPO.




  1. RS 1600cr plus fund raising programme has not been appraised by any Bank / FI.

  1. Expensive valuation. Loss making company is demanding a very hefty premium.

  1. Samvardhana Motherson Finance Limited (SMFL) has 18 subsidiaries, 19JVs and 1 associate company.  Motherson Sumi Limited (MSSL) is a listed entity in India in which SMFL holds 36% equity. MSSL has 83 companies as its subsidiaries / JVs /associates. Apart from this, the promoter group has promoted 23 entities. It is really a maze.

  1. Offer For Sale (Rs 321cr) is by 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, among others, is Vivek Chaand Sehgal is one of the promoters of Samvardhana Motherson Finance limited.

  1. 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. It will take another 2 or 3 years for the company to consolidate its operation and report decent bottom line.

6.    Average RONW in the last 3 years is just 8%.


  1. The company had negative cash flows in the past.

  1. The average cost of acquisition of shares by promoters is less than Rs10.


  1. One of the promoters is also part selling his stake in the offer for sale.

  1. Offer for Sale proceeds are being routed through tax havens.


6 comments:

  1. what do u think about delta corp? it is almost in a monopoly business in casinos and has first mover advantage. Do u think it is worth investing at this price keeping 5 year time frame?

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  2. Delta corp Rs 1 FV stock is trading at Rs 61. Running casinos is not a fascinating business in India.Regulations are tough. It has dismal track records in the recent past. Speculative stock, because of involvement of a big trader. Keep away from Delta corp.

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  3. What about the performance of the ipos by the bookrunners?

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  4. Search this blog for performance of BRLMs.

    ReplyDelete
  5. regulations may be tough now, but this is a sunshine industry which could be a boost to India's tourism potential. Thats why I asked u with respect to a 5 year timeframe.

    ReplyDelete
  6. That is not an sunshine industry.

    ReplyDelete