Professional Documents
Culture Documents
Submitted By:
Ankita Banerjee (11BSPHH010140) HanmantKawale (11BSPHH011151) ArpitTandon (11BSPHH010183) Harsh Dugar (11BSPHH010324) Sri Harsha (11BSPHH011177)
Contents
EXECUTIVE SUMMARY ................................................................................................................... 3 INTRODUCTION ................................................................................................................................. 4 SUMMARY OF FINANCIAL DATA .................................................................................................. 6 INDUSTRY OVERVIEW ..................................................................................................................... 9 RISK FACTORS ................................................................................................................................. 11 ISSUE DETAILS ................................................................................................................................. 21 CAPITAL STRUCTURE .................................................................................................................... 25 OBJECTIVE OF ISSUE ...................................................................................................................... 26 BASIS FOR ISSUE PRICING ............................................................................................................ 33 MANAGEMENTS DISCUSSION AND ANALYSIS ...................................................................... 40
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Type of Issue- 100% Book Build Issue Size- Rs. 120 crore Basis for pricing- Discounted Cash Flow and Relative Valuation Price by DCF- Rs. 513.81 Price by Relative Valuation (Floor Price)- Rs. 450 Cap Price- Rs. 540 ( 20% above floor price) Price band- Rs. 450- 540 Face Value: Rs10 per share Total number of shares offered to public- 2666667
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857.74 1,102.19
814.74 1,036.03 43 0 43 21.5 21.5 8.47 0 0 13.03 0 13.03 66.16 0 66.16 24.28 41.88 12.42 0 0 29.46 0 29.46
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The cumulative production for April-June 2012 registered a growth of 7.65 per cent over AprilJune 2011, manufacturing 1,700,675 vehicles in June 2012.
While Passenger vehicle segment grew at 9.71 per cent during April-June 2012, overall commercial vehicle segment registered an expansion of 6.06 per cent year-on-year (y-o-y).
Two Wheelers sales registered a growth of 10.51 per cent during April-June 2012 wherein Mopeds, Motorcycles and Scooters grew by 6.60 per cent, 6.79 per cent and 29.14 per cent, respectively
.
1203(3) Sales OPM (%) Operating Profit Other Income PBDIT Interest PBDT Depreciation Profit Before Tax Tax Net Profit 16625 14.6 2429 241 2670 304 2366 567 1799 526 1273 1103(3) 14183 14.3 2024 177 2200 215 1986 461 1525 405 1120 20 36 21 41 19 23 18 30 14 %Var 17 1203(12) 59420 13.4 7973 1103 9076 1518 7558 2083 5475 1535 3940 1103(12) 50366 13.9 7001 952 7953 959 6994 1814 5180 1443 3737 14 16 14 58 8 15 6 6 5 %Var 18
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General and industry-specific economic fluctuations could adversely affect the business, financial condition, results of operations and prospects. The business, financial condition, results of operations and prospects depend on a variety of general economic and industry-specific factors. The auto ancillaries sector is highly fragmented and competitive and is affected by changes in national, regional and local economic conditions, consumer credit, taxation, unemployment and changing demographic trends. These factors are generally beyond the companys control, and its ability to manage the risks they present is important to its operations. Reduced order for any reason, increased costs of doing business or reduced prices for the products as a result of these or other considerations could adversely affect the business, financial condition, results of operations and prospects.
The business is labour-intensive and depends on dedicated and capable employees, and if it is not able to continue to hire, train and retain qualified employees or if labour costs increase, the business, financial condition, results of operations and prospects could be materially and adversely affected.
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Changes in preferences of customers that are largely beyond the control of Sunbeam could adversely affect the business, financial condition, results of operations and prospects. The business is particularly sensitive to changing automobile manufacturer companys preferences, all of which may be caused by many factors that are generally beyond its control.
The company may be unable to accurately forecast demand for its products. The supply of raw materials for the products is based primarily on forecasts and requirements prepared by the key managers. These forecasts are based on past sales as well as anticipated demand, which is based to a certain extent on the subjective assessment of the key managers. An inability to accurately forecast demand for companys products would lead to excess supply or a shortage in the supply of raw materials from the suppliers, which would have a material adverse impact on its business, financial condition, results of operations and prospects. Increases in costs could result in a loss of revenue and adversely impact companys business, financial condition, results of operations and prospects. Sunbeams profitability depends in part on its ability to anticipate and react to changes in the cost of its supplies. Increases in the cost of important products could significantly increase its manufacturing expenses. It has no control over fluctuations in the price and availability of raw material or variations in products. If company is not able to obtain requisite quantities of quality raw materials at commercially reasonable prices, its ability to provide the reasonable price be adversely affected.
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The company faces strong competition in its business. The auto ancillary sector in India is subject to growing competition in the markets in which company compete. There is increasing competition in respect of price, service and product quality. Itmay also face competition from existing, experienced business willing to accept low margins on investment in order to enter new markets A significant increase in competition, whether from one new competitor or many, could exert downward pressure on prices, lower demand for the products and take advantage of new business opportunities and a loss of market share, all of which would adversely affect its business, financial condition, results of operations and prospects.
The indebtedness and the conditions and restrictions imposed by the financing agreements could restrict its ability to conduct the business, which may adversely affect the business, results of operations, financial condition and prospects. As of December 31, 2010, sunbeam had consolidated secured indebtedness of Rs. 200.41 million, and it may incur additional indebtedness in the future. The indebtedness (both current and future) could have several adverse consequences, including, but not limited to the possibility that company may be required to dedicate a portion of its cash flow towards repayment of debt, its ability to obtain additional financing in the future may be impaired, and fluctuations in market interest rates may adversely affect the cost of borrowings.
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Companyrequires a number of approvals, licences, registrations and permits in the ordinary course of its business, and the failure to obtain or renew them in a timely manner may adversely affect its operations. The company requires a number of approvals, licences, registrations and permits for the business. Additionally, it may need to apply for renewal of approvals which expire, from time to time, as and when required in the ordinary course. If it fails to obtain any applicable approvals, licences, registrations and permits in a timely manner, it may not be able to expand the business on time, or at all, which could affect the business and results of operations.
The insurance coverage may be inadequate, as a result of which the loss or destruction of assets could have a material adverse effect on the financial condition and results of operations. The company insures its property, equipment and product stock in India with major Indian insurance companies. The list of insured accidents includes risk of damage caused as a result of fire, gas and other household explosions, flood and water main accidents, robbery and criminal activity, vandalism and unlawful acts of third parties, power outages, terrorism and other similar events. The amounts, coverage limits and deductibility provisions of insurance are determined, with a view to maintaining appropriate insurance coverage on assets at a commercially reasonable cost and on suitable terms. This may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay the full current market value or current replacement cost of its assets. Any large uninsured loss orinsured loss which significantly exceeds the insurance coverage could adversely affect its business, financial condition, results of operations and prospects.
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Political instability or changes in the Government in India or in the Government of the states where the company operates could cause us significant adverse effects. The company is incorporated in India and all of its operations, assets and personnel are located in India. Consequently, its performance and the market price and liquidity of the Equity Shares may be affected by changes in exchange rates and controls, interest rates, Government policies, taxation, social and ethnic instability and other political and economic developments affecting India. The Government has traditionally exercised, and continues to exercise, a significant influence over many aspects of the economy. Sunbeams business is also impacted by regulation and conditions in the various states in India where is operates. The business, and the market price and liquidity of the Equity Shares may be affected by interest rates, changes in Government policy, taxation, social and civil unrest and other political, economicor other developments in or affecting India. Since 1991, successive Governments have pursued policies of economic liberalisation and financial sector reforms. However, there can be no assurance that such policies will be continued. Any political instability could affect the rate of economic liberalisation, specific laws and policies affecting foreign investment, the auto ancilliaries industry or investment in companys Equity Shares. A significant change in the Governments policies, in particular, those relating to the automobile industry in India, could adversely affect its business, results of operations, financial condition and prospects and could cause the price of the Equity Shares to decline.
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Ability to raise foreign capital may be constrained by Indian law. As an Indian company, the company is subject to exchange controls that regulate borrowing in foreign currencies.Such regulatory restrictions limit the financing sources for the business operations or acquisitions and other strategic transactions, and consequently could constrain its ability to obtain financings on competitive terms and refinance existing indebtedness. In addition, company cannot assure its investors that the required approvals will be granted to us without onerous conditions, or at all. Any downgrading of Indias debt rating by an international rating agency could have a negative impact on its business, results of operations, financial condition and prospects. Any adverse revisions to Indias credit ratings for domestic and international debt by international rating agencies may adversely impact companys ability to raise additional financing and the interest rates and other commercial terms at which such additional financing is available. This could have a material adverse effect on the business and future financial performance, ability to obtain financing for capital expenditures, and the price of Equity Shares.
Regional hostilities, terrorist attacks or social unrest in India could adversely affect the financial markets and the trading price of the Equity Shares could decrease. Terrorist attacks and other acts of violence or war including those involving India, the United States or other countries, may adversely affect the Indian and worldwide financial markets.
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Regional hostilities, terrorist attacks or social unrest in India and South Asia or other countries, could adversely affect the financial markets and the trading price of the Equity Shares could decrease. Terrorist attacks and other acts of violence or war including those involving India, the United States or other countries, may adversely affect the Indian and worldwide financial markets. Increased volatility in the financial markets, including economic recession, can have an adverse impact on the economies of India and other countries.
There is no existing market for the Equity Shares, and it is known if one will develop. Stock price may be highly volatile after the Issue and, as a result, investor may lose a significant portion or all of his investment. Prior to the Issue, there has not been a public market for the Equity Shares. It cannot predicted to what extent investor interest will lead to the development of an active trading market on the Stock Exchanges or how liquid that market will become. If an active market does not develop, investor may experience difficulty selling the Equity Shares that are purchased. The Issue Price is not indicative of prices that will prevail in the open market following the Issue. Consequently, investor may not be able to sell his Equity Shares at prices equal to or greater than the Issue Price. The market price of the Equity Shares on the Stock Exchanges may fluctuate after listing as a result of several factors, including the following:
The performance of the Indian and global economy Risks relating to the business and industry, including those discussed in this Red Herring Prospectus Strategic actions by company or competitors Investor perception of the investment opportunity associated with the Equity Shares and companys future performance Page | 17
Ability to pay dividends in the future will depend upon future earnings, financial conditions, cash flows, working capital requirements and capital expenditures. The amount of future dividend payments, if any, will depend upon future earnings, financial condition, cash flows, working capital requirements, capital expenditures and other factors. There can be no assurance that company will be able to pay dividends. Additionally, company may be prohibited by the terms of future debt financing agreements to make any dividend payments until a certain time period as may be agreed with lenders.
There will be restrictions on daily movements in the price of Equity Shares, which may adversely affect a shareholders ability to sell, or the price at which it can sell, Equity Shares at a particular point in time. Equity Shares, once listed, will be subject to a daily circuit breaker imposed by the Stock Exchanges, which will not allow transactions beyond specified increases or decreases in the price of Equity Shares. This circuit breaker operates independently of the index-based, market-wide circuit breakers generally imposed by SEBI on Indian stock exchanges. The percentage limit on circuit breakers will be set at some point by the Stock Exchanges based on the historical volatility in the price and trading volume of Equity Shares. As a result of this circuit breaker, no assurance may be given regarding investors ability to sell his Equity Shares or the price at which he may be able to sell Equity Shares at any particular time.
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Investors will not be able to sell immediately on an Indian stock exchange any of the Equity Shares purchased in the Issue. The Equity Shares will be listed on the Stock Exchanges. Pursuant to Indian regulations, certain actions must be completed before the Equity Shares can be listed and trading may commence. Investors book entry or demat accounts with depository participants in India are expected to be credited within three working days of the date on which the basis of allotment is approved by the Designated Stock Exchange. Upon receipt of final approval from the Stock Exchanges, trading in the Equity Shares is expected to commence within 12 Working Days from the Bid/Issue Closing Date. Company cannot assure that the Equity Shares will be credited to investors demat accounts, or that trading in the Equity Shares will commence, within the time periods specified above. Any delay in obtaining the approvals would restrict the investors ability to sell the Equity Shares.
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Foreign investors are subject to foreign investment restrictions under Indian law that limit Companys ability to attract foreign investors, which may adversely impact the market price of the Equity Shares. Under the foreign exchange regulations currently in force in India, transfers of shares between nonresidents and residents are freely permitted (subject to certain exceptions) if they comply with the requirements specified by the Reserve Bank of India (RBI). If the transfer of shares, which are sought to be transferred, is not in compliance with such requirements or fall under any of the exceptions referred to above, then the prior approval of the RBI will be required. Additionally, shareholders who seek to convert the Rupee proceeds from a sale of shares in India into foreign currency and repatriate that foreign currency from India will require a no objection/tax clearance certificate from the income tax authority. The Company cannot assure investors that any required approval from the RBI or any other Government agency can be obtained on any particular terms or at all.
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Eligibility for IPO The Company is eligible for the Issue in accordance with Clause 2.2.1 of the SEBI DIP Guidelines as explained under, with the eligibility criteria calculated in accordance with financial statements under Indian GAAP: The Company has net tangible assets of at least Rs. 300 Lacs in each of the preceding three full years (of 12 months each) of which not more than 50% is held in monetary assets and is compliant with Clause 2.2.1(a) of the SEBI DIP Guidelines; The Company has a track record of distributable profits in accordance with Section 205 of Companies Act, for at least three of the immediately preceding five years and is compliant with Clause 2.2.1(b) of the SEBI DIP Guidelines; The Company has a net worth of at least Rs. 100 Lacs in each of the three preceding full years and is compliant with Clause 2.2.1(c) of the SEBI DIP Guidelines; The aggregate of the proposed Issue size and all previous issues made in the same financial year in terms of size (i.e. offer through the offer document + firm allotment + promoters contribution through the offer document) is not expected to exceed five times the pre-Issue net worth of the Company as per the audited balance sheet of the last financial year and is compliant with Clause 2.2.1(e) of the SEBI DIP Guidelines. The company has changed its name from Sunbeam Auto Ltd. to Sunbeam auto Pvt. Ltd. w.e.f 19.05.2010, but there has been no change in the business activities. In Crore Net tangible assets Monetary assets Distributable Profits Net worth, as restated
2011 190.95 172.52 29.46 146.72 2010 148.47 157.36 13.03 120.95 2009 154.06 118.79 8.17 109.96 2008 154.03 127.59 9.28 104.96 2007 160.55 139.69 13.19 98.07
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Promoter contribution and Lock-In-Period Currently the promoter has a stake of 74% (5532210 shares). It is assumed that the promoters have diluted their stake to 50% for the public issue. The promoters will have 3,750,000 shares post issue. As per SEBI guideline-4.11.1 the promoters have a lock in period of minimum 3 years post the public offer. Total paid up capital post issue is Rs. 26666670crores. As the promoters have a contribution of 50% of the total paid up capital, it satisfies the SEBI-guideline 4.1.1 of minimum 20% of post issue paid up capital by promoters. Page | 24
Promoter have diluted their stake in this public issue, promoter stake at post issue structure will be come down from 76% to 50%.
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Phase II
Phase III
*1.55 Cr allocated for employee cost after completion of Phase-III when capacity is fully used for new plant Page | 26
3. Cost associated to building, employee and machine are with respect to capacity utilization in that year Item wise Costing Land- Land will be purchased in Bhiwadi at an approximate price of Rs. 6 crore. Company plans to buy the land required for the project in a single slot. This includes the expenses towards Legal Fees, Stamp Duty, Registration and other miscellaneous expenses. It also includes Rs. 1cr for land development which consists of land leveling, compound wall, plantation, etc. Building- the detailed cost of building which will be completed in three phases is described belowParticulars Tool Room Machine shop Quality Control Labs Phase I (70%) 2.1 3.5 1.4 Phase II (20%) 0.6 1 0.4 Phase III (10%) 0.3 0.5 0.2 Page | 27
Power 0.85
1.445
1.615
1.7
Employee Costs The company plans to increase the capacity of existing plant in 2013. Accordingly the cost incurred is 0.24 Crore. This has been taken into consideration taking into consideration of total employee base of 1100 as per the profile. Employees are working on a 3 shift basis. Assumption- 0.3 Crore has been kept for contingencies
Phase I Phase II Phase III Full Capacity Utilization Employee Cost 0.24 0.41 0.78 1.55
Issue Expenses- Rs. 8.4 crores has been assumed to be issue expenses.
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12
40
12
INR 11.33
15
INR 3.40
INR 1.13
Glide Master
20
INR 1.11
INR 7.35
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Proposed Schedule of Implementation (time wise)- the entire project is expected to be completed in a period of 3 years. The proposed schedule (time-wise) is given below-
S.No 1
Start Jan-2013
End Mar-2013
Phase I Phase II Phase III Plant and MachineryOrder and Delivery 3 Phase I Phase II Phase III Trial Production 4 Phase I Phase II Phase III Commercial Production 5 Phase I Phase II Phase III
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01-Apr-2014 to 31-Mar2015
01-Apr-2015 to 31-Mar-2016
01-Apr-2016 to 31-Mar-2017
7 2 1
50.4
0 14.4
7.2
1.6 2 2 16
Capital Requirement
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A) FCFF by forecasting method: In this method financial results were forecasted viz. income statements and balance sheet by taking proper assumptions of economic factors like inflation effect, and prevailing trend in the cost structure and benefits of economies of scale after expansion. 1. Sales Forecasting: Sales forecasting is carried out by considering the future expansion in capacity and price effect due to inflation. Capacity Expansion plan: 50% capacity will be added into the existing capacity Phase Year Proposed Capacity Expansion Phase-1 2012 Capital expansion will be in progress 1.05 % 1359.88 Phase-2 2013 70% of additional capacity utilised Phase-3 2014 90% of additional capacity utilised 1.05 % 2355.45 2015 100% additional capacity utilised 1.05 % 2671.08 2016 Plant will on full capacity 1.05 % 2884.77 Page | 33
1.05 % 1982.70
3. Other Income: It is forecasted on basis of past trend with sales, slope for the particular trend is calculated and further figures are forecasted , also investment made during capital expansion also considered.
4. Stock Adjustments: closing and opening stock of work in progress, raw material and finished goods stock in operating year is considered in calculations It is forecasted on basis of past trend with sales, slope for the particular trend is calculated and further figures are forecasted.
5. Expenditures: It generally includes the raw material cost, power cost, employee cost, and other manufacturing cost, and selling and distribution costs. It is assumed that future cost heads will follow the past trend. Therefore the individual cast heads are forecasted on basis of past trend with sales, slope for the particular trend is calculated and further figures are forecasted.
6. Interests Expenses: It is assumed that company will not add any debt in future five years as it has enough fund through public issue and CFO to meet its requirements. Therefore its interest expenses will cover the existing debt obligations only. 7. Depreciation Expenses: Depreciation expenses are calculated by considering the addition of new asset base in capital expansion. New asset base have life of 15 years. Therefore depreciation expenses will be expenses on old assets plus the expenses on new asset base.
8. Networking Capital: Working capital after expansion will also increase in proportion of sales, so heads under current asset and current liabilities are forecasted by considering the turnover ratios. Cash and bank balances are independent one and it is forecasted by considering the short term deposits in capital expansion. Page | 34
Therefore, WACC has been calculated as: Debt/Value Debt/Equity Asset Beta Equity Beta Cost of Equity Cost of Debt WACC 35.3% 54.5% 0.36 0.56 13.32% 15.00% 11.79%
10. Value of firm : Value of firm is the sum of intermediate value and terminal value, here the intermediate value, calculated till year 2016 using the free cash flow to the firm. Free cash flow to the firm is calculated by adjusting the net operating profit after tax by adding depreciation and subtracting the net working capital and capital expenditure and terminal value is calculated by considering the company will grow after yr 2016, in line with industry at 5% perpetual growth rate.
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B) Relative Valuation
Relative valuation is a simple way to unearth low-priced companies with strong fundamentals. As such, investors use comparative multiples like the price-earnings ratio (P/E), enterprise multiple (EV/EBITDA) and price-to-book ratio all the time to assess the relative worth and performance of companies, and to identify buy and sell opportunities. In practice, the multiple of a company is compared to multiples for a peer group of companies rather than just one. The peer group typically consists of companies in the same industry group and of similar size, based on the assumption that future earnings and risk premiums are identical or similar for such companies.
The trouble is that while relative valuation is quick and easy to use, it can be a trap for investors. A general weakness of the relative valuation models is that the estimates are often based on accounting data. Despite attempts to harmonize accounting regulations through the International Financial Reporting Standards (IFRS)or local Generally Accepted Accounting Principles (GAAP), there is still considerable room left for different interpretations. Therefore, even if indicators such as past earnings and sales can be seen as perfect proxies for future earnings and all companies in a peer group are in fact exposed to the same risks, there could still be differences in valuation multiples that were simply caused by accounting differences rather than real economic differences.
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1. Analysis of the variables taken. 2. Selection of the competitors and basis of selecting them. 3. Determination of the price as compared to Discounted Cash Flow (DCF). The assumptions and decisions that have taken related to the calculation and determination of the price of the share of the firm is in accordance with the prevalent guidelines and industry norms/practices. Peer Selection Peer companies selected, i.e. Alicon Castalloy Ltd, Amtek Auto, Autoline Industries and Sundaram Clayton, are shortlisted on the basis of similarity in their business with that of Sunbeam in case of industry they are existing in, scale of operations and business model followed.
Equity Market Equity Net Debt 746600000 32,678,900,000 1,977,300,000 Debt/Value Debt/Equity 51.8% 55.6% 54.5% 107.7% 125.1% 119.8% Beta 0.34 0.61 1.22 Asset Beta 0.20 0.35 0.71
Comparable Companies Alicon Amtek Auto Autoline Industries Sundaram Clayton Average
6,024,680,617 8,622,798,582
8,625,500,000 11,007,075,000
58.9% 55.2%
143.2% 123.9%
0.34 0.63
0.18 0.36
The Earnings Multiples such as P/E, P/S, P/BV and P/CF have been calculated for the competitors (year-2011) using the Relative Valuation technique after forecasting the financial statements, i.e. balance sheets and income statements for the years 2012 to 2016(for DCF). Price has been calculated by taking the minimum, maximum and average of the competitors. Enterprise value multiples have not been considered as this is a private company and finding its market value is difficult. EPS and other variables for Sunbeam have been calculated using weighted average of last five years. Weights have been decided based on current years sales as a percentage of sales of the previous year. Year 2011 has been considered as the base and other weights have been calculated taking it as a basis.
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Price (Average)
Price (Min)
Price (Max)
2.10 11.52
The calculations related to Discounted Cash Flows have resulted in the price determination at INR 513.81 per share. Using this prices have been compared with by various earnings multiple calculated to determine a price as close as possible to it. Therefore, based on the average weighted price obtained by using the multiples P/E and P/CF i.e. INR 433.45 and INR 451.63 respectively it has been decided to fix the price band as Rs. 450- 540 per share.
Amount to be Raised Price per share through DCF Closest Value (Relative Valuation) Price Band No of shares to be raised
The price of the issue has been decided to be high although it is an IPO and as compared to its competitors because the number of shares to be issued is taken to be only 0.26 crores, with the promoters contribution diluted to reach a new level of 50%. Page | 39
In manufacturing smaller and mid-size die cast components for two-stroke engines and for the automobile Industrymainly for the Indian. With around 4,000 employees and annual sales of approximately US$ 0.7 billion, Sunbeam Auto Pvt. Ltd. belongs to the fifth largest die casting company in India and one of the top 100 in the world.
The credibility of the company can be judged by its strong customer base which includes players like Hero Motor Corp Ltd. (HMCL), Maruti Suzuki Ltd., Munjal Showa Ltd., Visteon Powertrain Control Systems (India) Pvt, Ltd., Hero Briggs & Stratton Ltd., Sona Koyo Sterring Systems Ltd., Danaher of USA, Denso (India) Ltd., Sun Petri Limited, Diamler Chrysler AG of Germany, to name a few. Sunbeam is the principal supplier of ADCCs to HHML and presently supplies a major portion of HHMLs requirements of crank cases, cylinder heads, brake levers, clutch levers, cylinder case covers, grips, and holders. The plant has a casting capacity of 41,555 tonnes per annum and is located close to HMCLs Gurgaon and Dharuhera (Haryana) plants, and MSILs Gurgaon plant. Another new plant is set in Bhiwadi in the year 2011 to increase the plants castings capacity by 3000 tonnes. The company has a R&D department located at Gurgaon which is fully equipped modern Metallurgical Laboratory approved by Government of India. The company follows a zero defect approach and use of upgraded technology. Sunbeam also has a technical tie-up with Honda Foundry, Japan, to manufacture pistons for HMCL. Sunbeam has also been awarded with the ISO 9002 and QS 900 Certificate by BSI, UK. Page | 40
Company found that the below listed accounting policies as critical to the business operations and also for the understanding of financial condition, presentation and results of the operations. A critical accounting policy is one that is both important to the presentation of financial condition and results of operations and requires management to make difficult, subjective or complex accounting estimates and assumptions The assumptions, estimates and judgements that the management is required to make are inherently subject to a degree of uncertainty. These judgements are based on companys historical performance and experience. The evaluation of accounting practices that would be appropriate in respect of companys business, observation of trends in the auto ancillary industry, information with respect to the customers, and information available from other sources which are independent as appropriate. There is no assurance that companys judgement will prove to be correct or that same results are reported in future periods will not differ from the expectations reflected in the accounting treatment of certain items.
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Net Sales Gross Profit Margin Net Profit Margin Operating Expenses Ratio
Net Sales
1500 1000 500 0 Net Sales 0.08 0.06 0.04 0.02 0.00
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