Samvardhana Motherson's stock price down by more than 7% today

18 Oct 2022 , 11:41 AM

Samvardhana Motherson International (SAMIL) stock fell 7% and touched a 52-week low of Rs64.40 after more than 100 million shares of the company were traded in block deals. The stock dropped below the Rs68.53 low it had previously reached on September 29, 2022.

According to exchange data, about 133.35 million shares, or 2.95 % of SAMIL’s total equity, were traded on the BSE at 09:15. The purchasers’ and sellers’ names weren’t immediately known. According to reports, the Japanese company Sojitz Corp intended to sell 1.9 percent of the company’s stock in a block transaction. The block deal’s floor price was Rs 64.36 per share.

Compared to the 1.2% increase in the S&P BSE Sensex at 10:19 AM, the stock traded 6% down at Rs65.20. On the NSE and BSE, 202 million shares were traded in total.

ICRA notes that despite the company’s profitability and operating performance declining over the past few quarters due to inflationary pressures and sub-optimal offtake to OEMs as a result of supply-side constraints (EBITDA margins stood at 6.5 % in Q1FY2023, down from 7.1 percent in Q4FY2022), the company has undergone various cost-control initiatives and is in discussions with its customers to obtain compensation for inflationary pressures/lower demand.

SAMIL’s financial performance is nevertheless vulnerable to problems including cyclicality, expanding governmental interference, and severe competition from automakers in important developed regions, particularly Europe (which accounts for around 40% of the company’s revenues). The company is additionally exposed to negative demand effects from the region’s ongoing geopolitical instability and the application of any trade restrictions due to its overall high revenue dependency on European OEMs.

However, SAMIL’s manufacturing base is dispersed throughout 269 locations (close to clients) globally, and its shown ability to react to shifting customer requirements across geographies somewhat mitigates the risk, according to the rating agency.

ICRA expects that SAMIL’s earnings and cash flows, supported by its established operating profile and limited capital expenditure (capex) outgo, will likely assist the firm to maintain a favourable credit profile, which is reflected in the Stable outlook on the long-term rating. Any purchases made by the company and the influence they have on its credit profile will be trackable, according to ICRA.

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