Samvardhana Motherson QIP

Samvardhana Motherson Launches ₹6,398.6 Crore QIP to Reduce Debt and Pursue Acquisitions

Samvardhana Motherson International Ltd. (SAMIL) is making waves again, with its latest Qualified Institutional Placement (QIP) launch to raise ₹6,398.6 crore. The auto component giant is targeting a 5% equity dilution as part of its effort to reduce debt or fund a potential acquisition. With a floor price set at ₹188.85, this move comes after a year of phenomenal stock gains and strategic acquisitions.

Samvardhana Motherson’s QIP Launch: A Game-Changer for 2024

On Monday, Samvardhana Motherson’s board approved the highly anticipated institutional share sale, confirming the buzz created by a recent CNBC-TV18 newsbreak. The QIP will raise ₹6,398.6 crore, leading to a 5% dilution of the company’s total equity.

The floor price for the QIP has been set at ₹188.85, which represents a 2.6% discount from Monday’s closing price of ₹193.75. Interestingly, Samvardhana Motherson also retains the discretion to offer a further 5% discount on the floor price, providing added incentives for institutional investors.

Driving Down Debt or Seizing Opportunities?

The big question surrounding this QIP launch is: what will Samvardhana Motherson do with the proceeds? According to insiders, the company is likely to use the funds either to reduce its rising debt or to finance a major acquisition.

The company’s gross debt stood at ₹20,114 crore as of the quarter ending in June, while net debt was ₹13,370 crore. During the same period, gross debt jumped 16%, while net debt saw a staggering 29% increase. This QIP could be the much-needed liquidity infusion to lighten its debt load or to position the company for an aggressive acquisition.

Recent Moves: Acquisition of REE Automotive

Samvardhana Motherson is already on an acquisition spree. Over the weekend, the company announced its purchase of an 11% stake in Israel-based, US-listed REE Automotive for $15 million. This strategic acquisition aligns with its push to diversify into electric vehicle (EV) components and next-gen mobility solutions.

Compulsorily Convertible Debentures (CCDs): Another Fundraising Avenue

In addition to the QIP, Samvardhana Motherson is issuing Compulsorily Convertible Debentures (CCDs) to institutional investors. The CCD issue size is reported to be ₹2,250 crore. Each CCD will have a face value of ₹1 lakh and will convert into equity shares at a 13.83% discount to the conversion volume weighted average price or the floor price of ₹188.85. The maturity date for conversion is September 20, 2027.

This dual fundraising strategy—QIP and CCDs—allows the company to secure a more diversified capital base, while also offering long-term value to its institutional backers.

Market Performance: Samvardhana Motherson Stock Up 80% in 2024

Samvardhana Motherson has been one of the best-performing stocks in 2024, with gains of over 80% so far this year. On Monday, shares ended 1.7% higher at ₹193.75, reflecting continued investor confidence in the company’s growth trajectory.

The company’s promoters continue to hold a 60.36% stake as of the end of the June quarter, underscoring strong backing from key stakeholders.

Conclusion:

Samvardhana Motherson’s QIP launch, alongside its issuance of CCDs, represents a strategic move to strengthen its financial footing and capitalize on growth opportunities. Samvardhana Motherson QIP, Whether the proceeds are used to pare down debt or finance another acquisition, the company’s strong market position and aggressive expansion strategy make it a formidable player in the global auto components industry.

FAQs:

1.What does Samvardhana Motherson company do?

A. The products manufactured by Samvardhana Motherson Group comprises wiring harnesses (electrical distribution systems), rearview mirrors, moulded plastic parts including car interior and exterior parts, bumpers, dashboards and door trims, complete polymer modules, rubber components for automotive and industrial