Sona BLW Set to Unleash a Whopping ₹2,400 Crore QIP 

Shares of Sona BLW Precision Forgings experienced a rise of over 4% during morning trading on September 5, following the company's announcement of a ₹2,400 crore Qualified Institutional Placement (QIP) plan.
The company has set a floor price of ₹699.01 per share for the QIP, with the possibility of offering an additional 5% discount at its discretion.

As of 09:42 AM IST, Sona BLW shares were trading at ₹737.50 on the NSE, down from a high of ₹752.40 earlier in the session.

The raised funds will be used to either fully or partially repay outstanding debt. Additionally, a portion will be allocated towards completing the acquisition of Novelic, supporting strategic investments, and driving both organic and inorganic growth. The company also plans to use the funds for purchasing fixed assets, such as machinery and equipment, and for general corporate purposes.

On September 4, CNBC-TV18 reported that Sona BLW was in discussions to acquire the rail engineering division of Escorts Kubota, with a valuation around ₹2,000 crore. The report also mentioned a potential ₹2,000 crore QIP to finance the acquisition.

For FY24, Escorts Kubota's railway business generated ₹950 crore in revenue, accounting for 11% of the company’s total earnings in the June quarter.

In 2023, there were earlier discussions between Escorts and Knorr-Bremse, but these talks likely stalled due to disagreements over valuation. In October 2023, CNBC-TV18 had reported that Knorr-Bremse Group was in negotiations to acquire Escorts Kubota's railway division for over ₹4,000 crore.

PLI Certification

Sona BLW Precision Forgings also announced, after market hours on Wednesday, that it had received certification for its Hub Wheel Motor for electric two-wheelers under the Production-Linked Incentive (PLI) Scheme for the Automobile and Auto Component Industry from the Ministry of Heavy Industries.

QIP Launch

On September 4, after market hours, the company's board approved the plan to raise ₹2,400 crore through a QIP, with a floor price of ₹699.01 per share.

"The Fund Raising Committee (FRC) has designated September 4, 2024, as the 'Relevant Date' for the issue, and the floor price is set at ₹699.01 per equity share," according to the company's exchange filing.

Financial Performance

For the first quarter ending June 30, 2024, Sona BLW reported a 26.7% year-on-year growth in net profit, reaching ₹141.9 crore, up from ₹112 crore in the same quarter last year. The company's revenue from operations increased by 21.8% to ₹891.2 crore in Q1FY25, compared to ₹731.4 crore in Q1FY24.

However, Kotak Institutional Equities has issued a 'Reduce' rating for Sona BLW following its Q1FY25 results. The brokerage expects near-term revenue growth to fall short of market expectations, citing a slowdown in battery electric vehicle (BEV) volumes in several developed markets. Kotak has set a fair value of ₹675 per share.

Sona BLW Precision Forgings Stock Performance

Over the past year, Sona BLW shares have gained 24.8%, slightly underperforming the BSE Sensex, which rose 25.4% during the same period.