Nervous investors dessert SMFL’s IPO; management withdraws the issue

Free fall of equity market and sliding rupee damaged the initial public offering of Samvardhana Motherson Finance’s (SMFL) and coerced the management to withdraw the issue. This is the second largest IPO withdrawal in Indian capital market history.

SMFL public offer was subscribed merely 0.23 times till the final day of issue. Riding high on the offshore commitments, the management decided to launch the offer which was slated to make the company debt free. However, panicked foreign investors over the double taxation avoidance agreement (DTAA) with Mauritius and GAAR issue decided to be on sidelines which led to the undersubscription of IPO.

Standard Chartered Securities (India) and J P Morgan India were the book running lead managers and Link Intime was the registrar to the issue.

SMFL had planned to raise Rs 1,665 crore via initial public offer (IPO) and the company had fixed the price band at Rs 113 - Rs 118. The component supplier to the automotive industry had offered to sale stake of Radha Rani Holdings worth Rs 321 crore and fresh issue of equity shares worth Rs 1,344 crore.

The parent of listed Motherson Sumi Systems intended to utilize issue proceeds towards funding pre-payment and repayment of debt facilities, funding strategic investments and for funding investments in rear-view vision systems business.

The company is primarily engaged in providing full system solutions to automotive industry. The product portfolio include rear view vision systems, wiring harnesses, polymer processing and tool manufacturing, elastomer processing, IT and design engineering for the automotive and non-automotive sectors among the others. The company presently manufactures from 90 facilities with a presence in 23 countries across the world, including 23 locations outside India. Also, is in process of establishing new manufacturing facilities in India, Brazil and Thailand.