Sona Comstar slumps 6% after 20% equity changes hands via block deal

Shares of Sona BLW Precision Forgings (Sona Comstar) slipped 6 per cent to Rs 408.10 on the BSE in Monday’s intra-day trade after over 20 per cent of the total equity of the auto components & equipments company changed hands via a block deal.

At 09:15 am; nearly 118.76 million equity shares, representing 20.3 per cent of total equity of Sona Comstar, had changed hands on the BSE, the exchange data shows. The names of the buyers and sellers were not ascertained immediately.

At 10:09 am; the stock erased its partial intra-day losses and was trading 3 per cent lower at Rs 423.80 on the BSE. In comparison, the S&P BSE Sensex was up 0.19 per cent at 59,248.

According to a media report, American private equity firm Blackstone was looking to sell its complete stake in the auto component maker through a block deal today. According to reports, the floor price had been set at Rs 400 per share.

As on December 31, 2022, Blackstone Inc.'s unit Singapore VII Topco III Pte held nearly 120 million shares (20.50 per cent stake) in Soma Comstar, the shareholding pattern data shows.

Earlier, on August 18, 2022, Blackstone Inc.'s unit Singapore VII Topco III Pte. had sold 79.43 million equity shares of Sona Comstar for Rs 4,043 crore. CLICK HERE FOR DETAILS

Sona Comstar is one of the leading global providers of automotive technology solutions. The company is a leading supplier to the fast-growing global Electric Vehicle (EV) market.

In the past six months, Sona Comstar has underperformed the market by falling 23 per cent, as compared to a 2 per cent decline in the benchmark index.

Meanwhile, on February 28, 2023, the rating agency India Ratings & Research (Ind-Ra) has revised Sona Comstar’s outlook to ‘Positive’ from ‘Stable’ and affirmed the company’s long term issuer rating at ‘IND AA’.

The positive outlook reflects a significant increase in the company’s profitability during FY22-9MFY23 and a sizeable order book (including electric vehicle (EV) related order book), indicating the profitability to increase further and credit metrics to remain strong over FY23-FY24.

Although raw material prices have remained volatile, Ind-Ra believes Q4FY23 margins should benefit from a likely ease in commodity prices. The agency expects the EBITDA margins to also benefit from a healthy volume traction in higher margin EV-related products, along with the ramping up of the new assembly lines, resulting in improved cost efficiencies.

Ind-Ra expects the consolidated revenue to improve 22 per cent-24 per cent year-on-year (YoY) in FY23 and increase further to 25 per cent-28 per cent YoY in FY24. The growth would be driven by new programmes across product segments such as EV traction motors, gears and differential assemblies.

The growth will also be supported by a likely upcycle in the domestic medium and heavy commercial vehicle industry, supported by customer additions as well as strong order book-backed capacity expansion for assembly lines, Ind-Ra said.