Sona Comstar up 8% as institutional investors buy Blackstone’s 20.5% stake

Shares of Sona BLW Precision Forgings (Sona Comstar) rallied 8 per cent to Rs 436.25 in Tuesday’s intra-day trade ,after long term investors bought Blackstone’s 20.5 per cent stake in the company, on Monday via bulk deals in the open market.

On Monday, the stock had lost 7 per cent after Blackstone group sold its entire residual 20.5 per cent holding in Sona Comstar at a price of Rs 410/share via block deal. The total transaction size of stake sale is pegged at around Rs 4,920 crore.

Before yesterday's transaction, Aureus Investment Private Limited and Blackstone held 33 per cent and 20.5 per cent, respectively in Sona Comstar as the auto technology company's co-promoters.

Sona Comstar said that the stake sale saw strong demand from Foreign Institutional Investors, Sovereign Wealth Funds, Domestic Mutual Funds, and Insurance companies. Marquee investors like the Government of Singapore, Fidelity, FMR, ICICI Prudential Life Insurance, and HDFC MF bought shares from Blackstone in the bulk deal.

Sona Comstar is the leading global supplier of driveline solutions for Battery Electric Vehicles (BEV), Passenger Vehicles, Commercial Vehicles and Off-highway Vehicles. Sona Comstar is India's leading traction motor and motor-controllers supplier to electric two-wheelers (e2Ws).

With twin megatrends of electrification and automation in the automotive industry, the management said that the company is well-positioned to capture growth opportunities by remaining focused on its core values.

Meanwhile, on February 28, 2023, ratings agency India Ratings & Research (Ind-Ra) 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), indicated at increase in profitability, and strong credit metrics 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 benefit from a healthy volume traction in higher margin EV-related products, along with the ramp up of new assembly lines, which resulted 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, said analysts.

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