Wednesday, April 25, 2012

IPO ANALYSIS: SAMVARDHANA MOTHERSON OBJECTS DOES NOT AUGUR WELL.





Samvardhana Motherson IPO intends to raise Rs 1344 CR, apart from Offer For Sale proceeds of Rs 321Cr.  The funds intended to be used for the following purposes.

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

3 comments:

  1. Rubbish ipo, too expensive...implies buying motherson listco at twice the current price

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  2.  
    Samvardhana Motherson announced the price band for the IPO of Rs 113-118 per share. At the lower end of the band, it would result in dilution of 25%, fresh issue of 118.9mn shares and post dilution market cap of Rs 67bn (total outstanding shares – 593mn shares). This is as compared to Rs 69bn market cap of Motherson Sumi Systems Limited.
     
    If we do a reverse calculation, the implied market cap for Motherson Sumi comes to a minimum of Rs 100 bn
    This is based on the assumption that MSS (ex Peguform and SMR) business will grow at a mere pace of 13% and 10% in FY13/FY14. We believe that the growth opportunity in MSS is much higher than the implied growth rate. A faster growth in MSS (ex Peguform and SMR), which result in higher value accretion in MSS
    There is also an implied assumption that SMR and Peguform profits will be ~70% of MSS (ex Peguform and SMR) in FY14 as compared to 12% and 39% in FY12 and FY13 respectively. We see downside risks to these assumptions
    SMFL other business (ex MSS, Peguform and SMR) will report exponential growth. The most important risk is that this growth will be inorganic in nature and can have its own set of concerns w.r.t. to acquisitions (debt, turnaround risks etc). We are attaching a sheet which describes the business interest of SMFL
     
    We conclude that at the valuations of Rs 68bn of SMPL, the value of MSS will be in the range of Rs 100bn to Rs 110bn with an upside bias. The discount in the market cap of SMFL and MSS should be at least 33%, if not more

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