The initial public offering (IPO) of Blackstone-backed automotive technology company Sona BLW Precision Forgings (Sona Comstar) opens today (June 14) at a price band of Rs 285-291 per share. The issue will close on June 16.

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The Rs 5,550-crore offer comprises a fresh issue of Rs 300 crore and an offer for sale of up to Rs 5,250 crore by Singapore VII Topco III Pte Ltd.

The company proposes to utilise the fresh issue proceeds for repaying debts and general corporate purposes.

The public issue received a 'subscribe' rating from many brokerages on the back of the company’s strong product portfolio, growth potential in the electric vehicle (EV) segment, strong financial performance, technological capabilities, and high growth prospects.

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Blackstone-backed Sona Comstar to launch IPO on June 14, price band Rs 285-291 per share

Analysts believe the company is well-positioned to gain from high growth industry trends as well as from various initiatives introduced by the government such as the PLI scheme, which is likely to increase exports resulting in increased demand for differential gears in India.

Further, the company is continuously gaining market share across products in India and global markets, which bodes well for the growth.

"Going ahead, the focus will be on R&D and to innovate new products across segments especially EV space as it has high growth opportunities. On the financial front, performance has been encouraging with revenue and operating matrix growing at a steady pace. Also, it has a strong balance and decent cash flow. From a long-term perspective, we have a positive view of the company," said Religare Broking.

ICICI Direct said that the company provides an exciting play on electrification and possesses healthy financial strength but the valuations proposed are rich.

"Nevertheless, we believe the company offers a good investment case on the back of strong growth prospects. Accordingly, we recommend Subscribe only for long-term," ICICI Direct said.

Ventura Securities also recommend subscribing to the issue for long-term investing.

"We expect overall revenues / EBITDA / PAT to grow at a CAGR of 42.5% / 45.6% / 56.4% to Rs 4,530.9 cr / Rs 1,362.4 cr / Rs 823.4 cr, respectively, by FY24. EBITDA and net margins are expected to improve by 190 bps and 440 bps to 30.1% and 18.2%, respectively, over the same period. Consequently, return ratios RoE and RoIC are also expected to improve by 1,300 bps and 1,600 bps to 29.5% and 36.0%, respectively by FY24," the brokerage said.

The company is well-diversified in terms of its revenue generation both across categories and geographies. The company generates 41 percent of its revenue from EV plus Micro hybrid / Hybrid segment, and 14 percent revenue from pureplay Battery EV. It further plans to increase its EV share of revenue, going forward.

"The company is catering to fastest-growing segments within auto space and we believe that the increased adoption of the EVs acts as a tailwind for the players like Sona Comstar," said Canara Bank Securities.

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