Samvardhana Motherson concludes capital raise of Rs 6,438 crore via QIP

Samvardhana Motherson International Limited (SMIL), a major supplier of automotive components, successfully raised Rs 6,438 crore (approximately $771 million) through a capital-raise that concluded on Friday.

In its official statement, the company announced that the Qualified Institutional Placement (QIP) attracted significant interest from both domestic and international institutional investors. A QIP is a way for companies to raise funds by selling shares or securities to institutional investors like mutual funds, insurance companies, and pension funds. This method allows companies to avoid lengthy regulatory approval processes, speeding up capital raising. More than 95% of the issue was allocated to well-established long-term investors, including mutual funds, foreign institutional investors, and insurance companies, highlighting strong demand.

The fundraising involved the issuance of equity shares worth Rs 4,938 crore and compulsorily convertible debentures (CCD) valued at Rs 1,500 crore. CCDs are a type of financial instrument that must be converted into equity shares after a certain period, providing the company with long-term capital, while allowing investors to later become shareholders. The share price for the issue was set at Rs 190 per share, slightly above the regulatory floor price of Rs 188.85, as specified by the Securities and Exchange Board of India (SEBI).

The funds raised will primarily be used to pay off the company’s debts, which will strengthen Samvardhana Motherson's balance sheet, making the company more financially stable. A portion of the proceeds will also go towards general corporate expenses. By reducing its debt, the company aims to be better positioned to seize future growth opportunities.

Laksh Vaaman Sehgal, Director, SAMIL, remarked, “This transaction reinforces investors' confidence in our robust business model based on our long-term relationships with global OEMs.". "The success of this transaction is a testimony to investors’ belief in our strategic direction and our execution capabilities, which are based on prudent financial policies while delivering sustained growth and enhanced shareholder value.” Sehgal adds.

Samvardhana Motherson, previously known as Motherson Sumi Systems Limited, was founded in 1986 and is a key player in the global automotive industry. It supplies nearly all major automobile manufacturers worldwide and operates over 400 facilities across 44 countries, spanning five continents.

The transaction began on September 16 and was successfully completed on September 20. The lead managers for the transaction were HSBC Securities and Capital Markets (India) Private Limited, Axis Capital Limited, Jefferies India Private Limited, JM Financial Limited, Morgan Stanley India Company Private Limited, Batlivala C Karani Securities India Private Limited, BNP Paribas, IIFL Securities Limited, and Kotak Mahindra Capital Company Limited. Khaitan & Co. served as legal counsel for Samvardhana Motherson, while Cyril Amarchand Mangaldas and Linklaters acted as legal counsels for the lead managers.

The development comes just weeks after Sona BLW Precision Forgings Ltd. (also called Sona Comstar), a mobility technology company focused on electrified and non-electrified powertrain components, announced raising Rs 2,400 crore through a QIP. The issuance  saw significant participation from institutional investors and sovereign wealth funds, resulting in 5.5 times subscription.

Likewise, Craftsman Automation, another supplier, in June approved the raising of up to Rs 1,200 crore through a qualified institution placement.