Samvardhana Motherson slips 7%, hits new 52-week low after block deal

At 09:15 AM, around 133.35 million shares representing 2.95 per cent of total equity of the company changed hands on the BSE in a block deal, the exchange data shows.

Shares of Samvardhana Motherson International (SAMIL) hit a 52-week low of Rs 64.40 on falling 7 per cent after over 100 million shares of the auto ancillary company changed hands via block deals. The stock fell below its previous low of Rs 68.53, which it touched on September 29, 2022.

At 09:15 AM, around 133.35 million shares representing 2.95 per cent of total equity of SAMIL changed hands on the BSE, the exchange data shows. The names of the buyers and sellers were not ascertained immediately.

According to reports, Japan-based Sojitz Corp planned to sell 1.9 per cent stake in auto component major through a block deal. The floor price for the block deal was Rs 64.36 per share.

At 10:19 AM, the stock traded 6 per cent lower at Rs 65.20, as compared to 1.2 per cent rise in the S&P BSE Sensex. A combined 202 million shares had changed hands on the NSE and BSE.

While there has been a decline in the company’s profitability and operating performance over the past few quarters due to inflationary pressures and sub-optimal offtake to OEMs on account of supply side constraints (EBITDA margins stood at 6.5 per cent in Q1FY2023, down from 7.1 per cent in Q4FY2022), ICRA notes that the company has undertaken various cost-control initiatives and is in discussions with its customers to attain compensation for inflationary pressures/lower offtake.

SAMIL’s financial performance remains exposed to challenges such as cyclicality, increasing regulatory interventions and fierce competition witnessed by automotive companies in key developed markets, especially Europe (constituting around 40 per cent of the company’s revenues). Additionally, the overall large revenue dependence on European OEMs exposes the company to adverse impact on demand from the ongoing geopolitical conflict in the region and imposition of any trade tariffs.

However, SAMIL’s manufacturing footprint is spread over ~269 locations (in proximity to customers) across the globe and its proven ability to adapt to changing customer requirements across geographies mitigate the risk to an extent, rating agency said in rationale.

The Stable outlook on the long-term rating reflects ICRA’s expectation that SAMIL’s earnings and cash flows, supported by its established operational profile and controlled capital expenditure (capex) outgo, are likely to help the company to maintain a comfortable credit profile. Any acquisitions undertaken by the company and the consequent impact on its credit profile would remain a monitorable, ICRA said.