Sona BLW Precision Forgings Limited

Incorporated in 1995, Sona BLW Precision Forgings Limited is one of the leading automotive technology companies in India. The company is primarily engaged in designing, manufacturing, and supplying high-quality mission-critical automotive components such as differential assemblies, gears, conventional and micro-hybrid starter motors, etc. As per CRISIL Report, it is among the top 10 auto-component manufacturers. In 2020, Sona Comstar was among the top 10 global players for the differential bevel gear segment and among the largest exporters of starter motors in India, according to the Ricardo Report. The firm supplies its products across the countries such as India, US, Europe, and China. It has 9 manufacturing and assembly facilities across the USA, India (6), China, and Mexico. Sona BLW is a technology and innovation driven company. With a strong focus on research and development (“R&D”), they develop mechanical and electrical hardware systems, components as well as base and application software solutions, to meet the evolving demands of the customers. They are one of a few companies globally, with the ability to design high power density EV systems handling high torque requirements with a lightweight design, while meeting stringent durability, performance and NVH specifications, enabling EV manufacturers to enhance the vehicle range, acceleration and the overall efficiency. As per financials, company's financials almost static, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 30 as per FY20 earnings and in current year upto 9M of FY21 company has posted losses similar to other real estate companies and also company has very high debt. Currently once again pandemic situation is worsening and this may have more adverse effect on Real Estate sector, which is going from bad phase. So it may take at least 6-9 months to recover and so near future is not so good for this sector. So we giveAVOID As per financial performance, Sona has posted total income/net profits of Rs. 625.92 cr. / Rs. 55.24 cr. (FY18), Rs. 702.50 cr. / Rs. 173.76 cr. (FY19) and  Rs. 1043.76 cr. / Rs. 331.68 cr. in FY20. For FY21, it has reported net profit of Rs. 213.92 cr. on total revenue of Rs. 1568.64 cr. So company has posted consistent high growth over last couple of years. Company has posted an average EPS of Rs. 5.1 and average RoNW of 35% for last three fiscals. Issue is priced at a P/BV of 12.79 as per NAV of 22.75 on 31.03.21. As per FY21 earnings, P/E is around 79.35. So issue looks fully priced when compared with peers. As per RHP, comparison between the listed peers are shown in above table.  On BRLM's front, five BRLMs are associated with this IPO, and have handled around 36 IPO in last three fiscals. From last 10 IPOs, 2 are opened below issue price and remaining are opened above issue on the day of listing. As of now, all are trading above issue price. ( As on 11.06.2021) As per financials, company has shown good growth, RoNW is 35% for last three fiscals and as per FY21 earnings issue is priced at P/E of around 80, so IPO price looks fully priced. In current pandemic situation, auto sector is one of the worst affected sector, but Sona BLW is related to EV segment and growth in EV will decide its future growth, which is expected to very good. Performance of BRLM is good, So we give SUBSCRIBE rating to this IPO.

• 1 Sunjay Kapur
• 2 Sona Autocamp Holding Pvt. Ltd.
• 3 Singapore VII TOPCO III Pte. Ltd.