Blackstone-backed Sona Comstar’s ₹5,500 crore IPO could open next week, reports suggest

• If successful, Sona Comstar’s IPO would be the largest ever for an automotive component maker in India.
• The Blackstone-backed company supplies highly engineered, mission critical automotive components to OEMs of companies like Ford Motors, Daimler, Tata Motors, Ashok Leyland among others.
• The electric vehicle boom has also boosted Sona Comstar’s business, contributing 13% to the company’s topline.

Sona Comstar, one of India’s leading automotive components makers, is gearing up to launch its ₹5,500 crore initial public offering (IPO) next week, according to media reports.

The Gurugram-based company had filed its draft red herring prospectus (DRHP) in February this year, with plans to raise ₹6,000 crore from the IPO. But reports suggest that the offering has been reduced to ₹5,500 crore.

Sona Comstar is backed by US-based private equity giant Blackstone. Out of the ₹5,500 crore IPO, Blackstone Group affiliate Singapore VII Topco III would get ₹5,200 crore. The remaining ₹300 crore will be raised via a fresh issue of equity shares.

If successful, the Sona Comstar IPO would be the largest IPO by an auto component maker in India’s corporate history.

Also read: IPO watch: List of upcoming public issues in 2021 – from Zomato to GoAir, over a dozen companies have filed for a listing

Reports suggest that the IPO could launch as soon as next week, when the markets are at an all-time high and investors would be interested in getting in a new company in its early days on the bourses.

Understanding Sona Comstar’s business

Sona Comstar is a supplier of highly engineered, mission critical automotive systems. It supplies components to original equipment manufacturers (OEM) of global auto giants like Ford Motors, Daimler and back home, to Tata Motors and Ashok Leyland, among others.

The boom in the electric vehicle (EV) market around the world has boosted Sona Comstar’s prospects – 13% of its revenue is derived from supplies to the Battery EV segment.

It has nine manufacturing and assembly plants located across India, China, USA and Mexico – six of those are in India.

According to the Automobile Component Manufacturers Association (ACMA), automotive component exports are expected to touch $80 billion by 2026. In FY20, exports stood at $14.5 billion.

The industry’s turnover, on the other hand, is expected to touch $200 billion by 2026. It stood at $49 billion in FY20.

Here’s what Sona Comstar plans to do with its IPO proceeds

The company’s prospectus states that out of the ₹300 crore fresh issue, ₹225 crore will be used toward payment of certain borrowings, which will help reduce its cost of finance.

The remaining ₹75 crore are earmarked for general corporate purposes, which includes capital expenditure, working capital requirements and marketing expenses, among other things.

Sona Comstar also disclosed that it will not receive any proceeds from the ₹5,200 crore offer for sale.

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