Sona Comstar IPO - Should you apply or not?

What’s brewing this morning? The IPOs, which were on some vacation, are back to school. This time, with Sona BLW Precision Forgings Limited (Sona Comstar)

People will tell you’re living under a cave if you admit that you weren’t aware of the fund-raising frenzy prevalent a few months ago. The market was flooding with money, and companies were leaving no stone unturned to take it. And the IPO season is now back to the mainstream.

Sona’s IPO will be launched on the 14th of June 2021 and available for investors from then. Hence, it becomes imperative to know some of the key facts that will help you arrive at the right decision.

Sona BLW Precision Forgings - Details of the IPO  

The IPO aims to fulfill and fund the repayment of the loans and other borrowings either fully or partially. Further, the remains will also be utilized to meet the general corporate requirements and needs. However, the last date for the same has been fixed as June 16, 2021. And all the related processes such as allotment & refund of funds will be finalized, and the stocks will hit both the houses of the market, i.e., NSE and BSE, by the 24th of June this month. Hence, anyone opting to make a subscription for the same must do it at the earliest. 

The minimum amount of shares one could opt for has been fixed as 51 shares, amounting to Rs 14,841. However, a subscription thereafter can be made only in multiples of 51, the maximum being 13 such lots fixed at around 663 shares costing Rs 192,933. 

The entire issue will sum up to 5,550 crores. The issue will contain a fresh issue of 300 crores and an offer for sale of 5,250 crores. The face value of the share will be 10 per equity share. And, the IPO prices will range between Rs 285 to 291 per equity share. 

Sona Comstar - Company details

The company, which started its operation in 1995, is now one of India's leading automotive technology companies. Most of its customers celebrate a bond more than 15 years old, indicating a strong brand loyalty.

Moreover, the company is one of the top ten players in India and a leading company globally. It holds a 5% market share globally. Moreover, some of its clients hail from a number of countries such as the USA, China, Europe, etc., to name a few. Thus, it has its plants operating overseas as well.

The company specializes in the production and supply of high-quality and critical automotive components. Those include gears, micro-hybrid starters, etc. The major raw materials form a mix of steel and aluminum. However, the increase in rates seems to be a concern. But the company claims that the cost is passed on to its customers.

Here’s a record of the company’s listed peers obtained from Ticker:

Promoters of the company: Sunjay Kapur, Sona Autocomp Holdings Private limited, and Singapore VII Topco III Pte.

Sona Comstar Financials

The company has shown an upward trend in its revenues. As a result, the company's earnings per share (EPS) were approximately Rs 5.10 when the last three years are taken into account. However, the company did face a rough patch following the covid pandemic. This ultimately dragged its margin by over 15% in the recent quarter.

Its major revenue contributors are as follows:

Anyway, now that you have an idea about the company and its financials, let’s move on to the crux of the matter - Should you invest in the Sona BLW Forgings Ltd IPO?

Should you buy the IPO?

The company has a solid R&D department ensuring the company’s capability to innovate and produce better products. Its portfolio is also robust, having a number of products under its umbrella. Customers hail from a diversified backgrounds, and a strong relationship is maintained with all of them. The company is leading in the Electrical Vehicle segment, which has a good scope in the future.

One important thing worth noting is that the company never restricted paying the salaries of their employees even under the pandemic and falling revenue. This signifies their work ethic and indirectly speaks of the strong worker base.

However, its diversified manufacturing sites might become a problem if there is an issue globally (regulations or otherwise). In addition, the company is over-dependent on a few of its customers, who generate around 80% of the revenue. This might also pose a threat to its bottom line.

The Bottom Line 

In a world filled with options, making the right choice becomes crucial. The company has an equal number of advantages and disadvantages on its side. The investors should pay due attention to both while evaluating.

While considering the various factors, ensure that you don’t fall out of your risk profile relying on your luck. Because whether to invest or not essentially depends on each one’s comfort and risk profile. You should take steps that help you in building your portfolio and not risk it.

So what’s it going to be for you? Yes or No? Tell us.