New Delhi-based auto component supplier Sandhar Technologies IPO to raise up to Rs 512 crore opens for subscription today. Sandhar Technologies is a leading auto component suppliers largely focused on safety and security systems such as lock assemblies, mirror assemblies, operator cabins for 2W, PV and off-highway vehicles. Notably, the company has 21 product categories and 31 manufacturing facilities in India, 2 in Spain, 1 in Mexico and 5 are in the process of getting commissioned in India. While investors maybe mulling whether to subscribe to the issue, we take a closer look at four key details, and what brokerages have to say about the issue.
IPO Details
Sandhar Technologies’ IPO consists of a fresh issue aggregating up to Rs 300 crore and an offer for sale of up to 64 lakh equity shares by GTI Capital Beta. Post the offer for sale, the promoter’s shareholding is slated to reduce to 70.1% from 82.5% currently. According to the company’s prospectus, the price band is fixed at Rs 327-332 per share. Further, bids can be made for a minimum lot of 45 equity shares and in multiples of 45 equity shares thereafter. The IPO will remain open up to March 21.
IPO proceeds
According to Sandhar Technologies’ prospectus, the company proposes to utilise the net proceeds from the fresh issue (worth Rs 300 crore) towards repayment in full, or in part of certain loans and other general corporate purposes. The company will not receive any money from the offer for sale component.
Strengths
Pointing out the various strengths of Sandhar Technologies HDFC Securities says that the company has a Long-standing, and growing relationships with major OEMs; a well diversified product portfolio; Production facilities at vantage points close to customers based on the Glocal philosophy and strong R&D capabilities.
Key concerns
According to a report by Angel Broking a slowdown in 2W/PV/Commercial vehicle industries for Sandhar Technologies could impact its overall sales volume further, increasing competition from other players could impact the company’s business. HDFC Securities noted that Sandhar Technologies has a substantial amount of debt, which requires significant cash flows to service, and will continue to have substantial indebtedness and debt service obligations following the offer.
Valuations
Most brokerages have given a subscribe rating on the issue given reasonable valuation and the long-term potential. “ In terms of valuations, the pre-issue P/E works out to 25x 1HFY2018 annualized earnings (at the upper end of the issue price band), which is lower compared to its closest peer Minda Corporation (trading at 30x its 1HFY2018 annualized earnings),” Angel Broking said adding that better ROE profile and reasonable valuations warrants a subscribe rating.
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