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Sona BLW Precision Forgings Plans ₹2,400 Crore QIP at ₹675-700 per Share

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Synopsis:

Sona BLW Precision Forgings aims to raise ₹2,400 crore through a QIP at ₹675-700 per share. The company plans to use the funds for debt repayment, acquisition of Novelic, and growth initiatives. Equity dilution is expected at 6.06%.

Sona BLW Precision Forgings, a key player in automotive components manufacturing, is preparing to raise up to ₹2,400 crore through a Qualified Institutional Placement (QIP). The company has set a price range of ₹675-700 per share for the issuance, which could result in a 6.06% equity dilution at the lower end of the range.

This capital raise comes after receiving board approval on July 24, 2024, and a shareholder resolution passed on August 30, 2024. The company officially opened the QIP on September 4, 2024, with the "relevant date" being the same day.

Strategic use of proceeds

The raised funds will be channelled towards multiple strategic purposes. A significant portion will be used for the repayment or pre-payment of outstanding borrowings, providing financial flexibility to the company. Additionally, the proceeds will cover the remaining balance for the acquisition of Novelic, an advanced engineering firm.

Sona BLW also plans to use the funds to support both organic and inorganic growth opportunities. This includes capital investments in fixed assets such as machinery and equipment, further strengthening its production capabilities. A portion of the funds will also be allocated for general corporate purposes, enabling the company to maintain its operational efficiency.

Potential discount on floor price

The company set a floor price of ₹699.01 per share for the QIP but has also offered the possibility of a discount of up to 5%. This could bring the final issue price within the ₹675-700 range, subject to market conditions and book-running lead managers’ recommendations.

Strong financial performance in Q1 FY2025

Sona BLW's decision to raise funds follows its robust financial performance in the first quarter of FY2025. The company reported a 26.7% year-on-year increase in net profit, reaching ₹141.9 crore, compared to ₹112 crore in the corresponding quarter of the previous fiscal year. Revenue from operations also saw a notable rise of 21.8%, amounting to ₹891.2 crore, up from ₹731.4 crore in the same period last year.

On the operational front, the company’s EBITDA increased by 23.1%, climbing to ₹249.3 crore in Q1 FY2025, from ₹202.5 crore a year earlier. This strong financial footing supports the company's ambitious plans for growth and investment in new opportunities.

Sona BLW Precision Forgings’ ₹2,400 crore QIP is poised to enhance the company’s financial flexibility while enabling it to pursue strategic acquisitions and growth. The move is expected to bolster its market position and support future expansion.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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