Avoid Samvardhana Motherson Finance IPO: Angel Broking
Valuations do not provide a sufficient margin of safety to investors, the brokerage said. It arrived at a value of Rs 97/share against the IPO price band of Rs 113-118.
MUMBAI: Angel Broking recommended investors ‘avoid’ the initial public offering of Samvardhana Motherson Finance (SMFL). The valuations do not provide a sufficient margin of safety to investors, a report from the brokerage said.
“Based on our SOTP methodology, we arrive at a value of Rs 97/share against the IPO price band of Rs 113-118. Management expects to turn around the financial performances of SMR and SMPL over the medium term.
However, we believe that it is too early to factor in the anticipated turnaround in these two subsidiaries and valuations in our view are not providing a sufficient margin of safety to investors, considering the execution risks involved in the turnaround process. Hence, we recommend 'Avoid' on the issue,” the report said.
Angel Broking values SMFL’s stake in Samvardhana Motherson Reflectec (SMR and Samvardhana Motherson Polymers (SMPL) on an EV/sales basis instead of earnings-based multiples as current earnings of these companies do not reflect their true potential.
The company entered the capital markets to issue 141,101,695 shares of a face value of Rs 10 each in the price band of Rs 113-118 apiece.
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