Shares of Samvardhana Motherson International Ltd (SAMIL) plunged 14% to reach an intraday low of ₹ 66.05 apiece on the National Stock Exchange (NSE) after its promoters sold a stake in a large deal. Its shares were trading at ₹ 69.05 apiece at 12:07 PM on Thursday. 

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Sumitomo Wiring Systems (SWS), Japan and its 100% subsidiary H.K. Wiring Systems (HKWS)jointly held a 17.72% stake in SAMIL. However, SWS sold a 3.4% stake through a bulk deal on the bourses. This stake was sold as a part of its global deleveraging strategy to fund partial debt prepayment of the SWS group in the rising interest environment. 

SWS with HKWS also holds a 25.34% stake in Motherson Sumi Wiring India (MSWIL). With the above sell-out, SWS’s holding in SAMIL will reduce to 14.32%, while it will remain unchanged in MSWIL. 

SWS was the first joint venture partner of Motherson and is a promoter of Samvardhana Motherson International. This is the first stake dilution by SWS in the past forty years. In fact, it believes that SAMIL continues to be an aspiring entity with a robust global growth potential ahead, therefore, SWS will remain a promoter of SAMIL. SWS will be continuing their long-standing engagement with MSWIL as a principal joint venture partner and keep supporting it on evolving technologies and know-how. 

Samvardhana Motherson International is a globally diversified manufacturer with a diversified product portfolio. It manufactures electrical distribution systems, vehicle interiors, automotive rear vision systems, moulded parts, rubber components, telematics and more. 

It is a large-cap company with a market capitalization of ₹ 52,043 crores. It has an ideal debt-to-equity ratio of 0.68 but a low return on equity of 3.07%. Its shares were trading at a price-to-earnings ratio of 59.18, which is higher than the industry P/E of 38.70, indicating that the stock might be overvalued as compared to its peers. This could mean that investors are willing to pay a higher price for the company’s future earnings. 

Written by Simran Bafna 


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