Samvardhana Motherson International raises $771m in successful QIP amid investor demand

In a significant financial milestone, Samvardhana Motherson International Limited (SAMIL) has successfully closed its Qualified Institutional Placement (QIP) by raising a total of USD 771 million. The transaction, completed on September 20, 2024, witnessed strong demand from both domestic and international institutional investors, marking it as a pivotal event in SAMIL’s financial trajectory.

SAMIL attracts global institutional investors

The capital raise, amounting to INR 6,437 crore, attracted substantial interest, with over 95% of allocations directed to renowned long-only investors. These included global mutual funds, pension funds, and foreign institutional investors, reflecting high investor confidence in the company’s growth and financial strategies. The diversified shareholder base is set to strengthen the company’s financial stability and provide further momentum for future growth.

According to the details from SAMIL, the transaction was split between equity and Compulsorily Convertible Debentures (CCDs), with INR 4,937 crore raised through equity and INR 1,500 crore through CCDs. The share price for the equity offering was set at INR 190 per share, slightly higher than the SEBI-mandated floor price of INR 188.85 per share, indicating investor willingness to pay a premium for shares in the company.

Proceeds to strengthen balance sheet

SAMIL has emphasised that the proceeds from the QIP will primarily be used to reduce debt, further solidifying its financial health. A portion of the funds will also go towards general corporate purposes, as the company continues to pursue growth opportunities in global markets. The company has been lauded for its strategic foresight in balancing debt repayment with growth aspirations, enabling it to remain a strong contender in its sector.

Laksh Vaaman Sehgal, Director at SAMIL, noted that the successful closure of the QIP underscores the confidence that investors have in the company’s business model. He stated that the robust interest in the transaction highlights the strong relationships the company has fostered with its global clients, particularly Original Equipment Manufacturers (OEMs). The trust in the company’s strategic direction and financial prudence has led to increased investor belief in its long-term potential.

Expert opinions laud SAMIL’s strategic move

Financial experts view this QIP as a crucial move for Samvardhana Motherson International Limited, particularly in light of the challenges posed by global economic conditions. Many analysts have praised the company’s decision to utilise the raised capital for debt reduction, which they say will position SAMIL more favourably in terms of future growth opportunities. The automotive sector, where SAMIL is a key player, has seen significant fluctuations, and this capital infusion provides the company with a solid financial cushion.

Industry insiders have also noted that this QIP has enabled SAMIL to stand out as one of the few companies globally to execute a composite issuance involving both equity and convertible debentures. This reflects the company’s commitment to innovative financial strategies and its ability to attract significant institutional interest despite the challenging economic backdrop.

Book running lead managers and legal teams

The transaction was overseen by a consortium of book-running lead managers, including HSBC Securities and Capital Markets, Axis Capital, Jefferies India, JM Financial, and Morgan Stanley India. On the legal front, Khaitan & Co served as counsel for SAMIL, while Cyril Amarchand Mangaldas and Linklaters provided legal support to the book-running lead managers.

With the successful completion of this QIP, Samvardhana Motherson International Limited is poised for enhanced operational flexibility, greater market confidence, and a renewed ability to pursue its strategic objectives in the global automotive supply sector.

Samvardhana Motherson International Limited’s QIP of USD 771 million reflects the growing confidence of institutional investors in the company’s strategic direction. With its focus on debt reduction and growth in international markets, SAMIL is set to consolidate its position as a global leader in the automotive and manufacturing sectors. The company’s strategic use of raised capital will be key to its continued success.