Wabco India hits 20% upper circuit on strong response to OFS

Shares of Wabco India were locked in upper circuit of 20 per cent at Rs 6,777.60 on the BSE in Friday's session after the promoter received a strong response for its offer-for-sale (OFS). The company informed the stock exchanges that it will exercise oversubscription option to the extent of 686,955 shares in addition to the base offer size.

The stock erased its entire previous day’s 7 per cent decline on the BSE. Till 09:30 am, a combined around 9,000 shares had changed hands on the counter and there were pending buy orders for around 70,000 shares on the NSE and BSE.

The promoter's two-day stake sale through the OFS route opened on Thursday for non-retail investors and will open today for retail investors. The floor price has been fixed at Rs 5,450 a share, an 11 per cent discount to Wednesday's closing price of Rs 6,102 apiece on the BSE.

ZF International UK i.e. the principal shareholder (promoter group) of Wabco India (WIL) proposes to sell up to 3.43 million shares or 18.1 per cent stake (including green-shoe option) in WIL to comply with minimum public shareholding norms. The promoter group intends to reduce its stake in WIL from 93.1 per cent to 75 per cent post the OFS.

WIL is a leader in the Indian CV braking space with a diversified presence across clients and channels i.e., OEM, aftermarket and exports. The company’s status as a technology pioneer (over the years, it has been the first to introduce ABS, AMT, ESC, ADAS, etc, to the Indian CV market) and complete solutions provider has led to substantial outperformance vis-à-vis industry, translating into ever-increasing content per vehicle.

According to Wabco India, a well thought out vehicle scrappage policy with incentives is likely to spur demand for commercial vehicles in the short to medium-term. Adoption of digital connectivity solutions will make fleets more efficient and cost-effective, it said.

"The government's FAME-II scheme has led to an increase in the adoption of electric buses in the country and it can make a significant budget allocation to the Ministry of Urban Development to support State Transport Undertakings in procuring buses with other fuels like CNG, diesel, biofuel etc. This would also lead to reviving demand for commercial vehicles," the company said in its FY20 annual report.

Analysts at ICICI Securities hold a positive view on WIL amidst the cyclical upturn in its user segments i.e. Commercial Vehicles, promoter’s intent to increase global sourcing from its Indian arm and wider product basket post the global acquisition of its erstwhile parent by ZF group. Henceforth, we recommend investors to subscribe to the upcoming OFS, the brokerage firm said in a note.