Showing posts with label ipo analysis samvardhana ipo news samvardhana ipo review samvardhana ipo recommendations samvardhana. Show all posts
Showing posts with label ipo analysis samvardhana ipo news samvardhana ipo review samvardhana ipo recommendations samvardhana. Show all posts

Friday, April 27, 2012

IPO ANALYSIS: SAMVARDHANA MOTHERSON. LEAVE ‘MOTHERSON’ ALONE.




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.