Sona Comstar to acquire 54% stake in Serbian firm NOVELIC; stock jumps 9%

Shares of Sona BLW Precision Forgings (Sona Comstar) zoomed 9 per cent to Rs 458.90 on the BSE in Tuesday's intra-day trade after the company said it has signed an agreement to acquire 54 per cent equity stake in Serbian firm NOVELIC.

Sona Comstar is one of the leading global providers of automotive technology solutions. The company is a leading supplier to the fast-growing global Electric Vehicle (EV) market. NOVELIC, meanwhile, is a leading provider of mmWave radar sensors, perception solutions and full-stack embedded systems.

Sona Comstar will acquire this 54 per cent equity stake in NOVELIC for Euro 40.5 million through a combination of primary and secondary purchases with a staggered payment structure in the ratio of 60:20:20 at closing, 12 months and 24 months, respectively.

The transaction values NOVELIC at an enterprise value (EV) of euro 64.5 million on a pre-money basis and euro 75 million on a post-money basis, with an implied valuation multiple of 26 times CY22 estimated PAT. The transaction is expected to close by the end of Q4FY23 and is subject to customary closing conditions, Sona Comstar said in press release.

The acquisition is expected to be EPS accretive for Sona Comstar from the first year and offers strong growth opportunities over the medium term. NOVELIC's CY22 revenue and PAT is estimated at euro 9.3 million and euro 2.5 million, respectively, and it has been profitable every year since its inception. With the acquisition of Novelic, Sona Comstar has started building its third business vertical of ADAS Sensors and Software to address the megatrends of increasing vehicle autonomy and automation.

NOVELIC is one of the very few profitable, high-tech, and fast-growing companies in the $43 billion ADAS Sensors market. It's unique & patented mmWave radar technology is the best solution for in-cabin sensing due to high accuracy, lower cost, and privacy protection. In-cabin monitoring will see a rapid adoption due to legislation and OEM actions in major automotive markets globally, Sona Comstar said on rationale for the acquisition.

However, in the past six months, Sona Comstar has underperformed the market by falling 20 per cent, as compared to 11 per cent rally in the S&P BSE Sensex. In the past one year, the stock has tanked 38 per cent, as against 0.18 per cent decline in the benchmark index. It had hit a record high of Rs 839 on December 14, 2021.

Private equity firm Blackstone on August 18, 2022 had divested 13.6 per cent stake in auto component maker Sona Comstar for over Rs 4,000 crore through open market transactions. The shares were picked up by the Government of Singapore and SBI Mutual Fund among others, bulk deal data with the BSE showed.

Blackstone, which holds a stake in Sona BLW through an entity called Singapore VII Topco III PTE. Ltd, offloaded a total of 79.43 million shares or 13.6 per cent stake in the company, the data showed. Post transaction, Blackstone holding in the company declined to 20.52 per cent from 34.12 per cent at the end of June 2022 quarter.