American private equity giant Blackstone backed auto parts firm Sona Comstar is likely to launch an initial public offer (IPO) next week in a bid to raise Rs 5,500 crore, sources with knowledge of the matter told Moneycontrol. If plans fructify, this will be the largest IPO by any auto component firm in India Inc's history.
“The approval from the RoC has come in and the IPO is likely to be launched next week on June 14,” one of the individuals cited above told Moneycontrol.
“The size of the IPO has been trimmed from the earlier Rs 6,000 crores to Rs 5,500 crore. The secondary component has been reduced from 5, 700 crore to Rs 5,200 crore. The primary component remains at Rs 300 crore “ said a second individual.
A third individual also confirmed the launch plans.
Investment banks Kotak Mahindra Capital, JM Financial, Credit Suisse, Nomura and JP Morgan are working on the IPO. The legal advisors are Cyril Amarchand Mangaldas & Trilegal,
All three individuals spoke to Moneycontrol on the condition of anonymity.
Moneycontrol could not elicit an immediate comment from Blackstone, Sona Comstar and the advisors. This article will be updated as soon as we hear from the firms.
On February 24, 2021, Moneycontrol was the first to report the filing of the DRHP (draft red herring prospectus) by the firm.
According to that report, as far as the IPO proceeds are concerned, the primary portion will repay existing debt and the rest will create debt funding capacity for additional future capex investments. Blackstone will continue to be a long term investor in the firm post listing.
Moneycontrol was also the first to report the firm’s listing plans on January 20, 2021.
Blackstone is the world’s largest alternative asset manager and the biggest owner of commercial real estate in India. Its housing finance portfolio company Aadhar Housing Finance has also filed a DRHP for a $1 billion IPO in 2021.
The Sona Comstar story
In August 2019, Blackstone announced the merger of Chennai-based auto component firm Comstar, which it controlled, with Sunjay Kapur's Sona BLW to create Sona Comstar. Blackstone would hold a 65 percent stake in the firm and Kapur would hold 35 percent, according to the announcement.
Kapur is the Chairman of Sona Comstar, which has nine plants spread across India, China, Mexico and the United States. It had a revenue of Rs 1,600 crore in FY19 and has set a revenue target of $1 billion by 2024. According to news reports, it is a supplier to auto majors such as Ford Motors, Daimler, Tata Motors and Ashok Leyland. It has won 50 new programs from 26 customers, which is expected to translate into revenues starting the current year.
The global EV play
Sona Comstar is a global company, diversified across platforms, products, geographies, customers and end segments. It is a leading R&D and innovation-led automotive technology player which designs and manufactures highly engineered, mission-critical automotive systems and components.
It is a major supplier to the global EV market which has benefited from the megatrend to electrification and derives 13 per cent-plus revenue from sales to the pure play Battery EV (BEV) segment. The firm has industry-leading financial metrics with EBITDA margins of around 25 percent and ROE of 35 percent.
According to its website, the company is one of the world’s largest manufacturers of precision-forged gears for differentials with a global market share of 6 percent as well as the producer of the world’s lightest starter motor. In the domestic market, the firm is a leading player in the commercial vehicle space for bevel gear supplies.
In addition to differential gears, the company produces BSG (Belt Driven Starter Generator) solutions for hybrid cars, traction motors for EV applications, starter motors, alternators, transmission gears, axle stubs and differential assemblies for electric and combustion engine vehicles.
According to the Automobile Component Manufacturers Association (ACMA), auto component exports from India are expected to reach $80 billion by 2026.