- RS 1600cr plus fund raising programme has not been appraised by any Bank / FI.
- Expensive valuation. Loss making company is demanding a very hefty premium.
- 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.
- 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.
- 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%.
- The company had negative cash flows in the past.
- The average cost of acquisition of shares by promoters is less than Rs10.
- One of the promoters is also part selling his stake in the offer for sale.
- Offer for Sale proceeds are being routed through tax havens.