Iran’s Largest Carmaker to Float Shares in Block Sale

The sale includes more than 2.2 billion shares in IKCO, including a 10% stake controlled by Samand Investment Company and 5.6% controlled by Negar Nasr Sahm Company, both subsidiaries of IKCO.

Total sale value stands at 9.76 trillion rials ($212.17 million), 28.26% of which will be sold in cash and 71.74% in installments over three years. Each share is to be sold at a base price of 4,034 rials.

Three potential buyers for the block sale have come forward so far, a TSE official told Bourse Press on Saturday, adding that both TSE and IKCO expect stiff competition.

Iran’s largest automotive parts manufacturer, Crouse, is one of the firms named as a potential buyer.

The two subsidiary companies first announced the block sale on December 10, 2017, and aimed to go ahead with it in 10 days, but the process was delayed each time an announcement was made.

IKCO’s shares grew on the back of the news, rising 5.99% during December 10-19 to 3,167 per share. Investors’ enthusiasm dampened over the delay, however, bringing the automaker’s total share price growth since Dec. 10 to date to 3.51%. IKCO’s current market cap is at 44.99 trillion rials ($978.2 million).

IKCO, which is currently running multiple important projects, will use most of the money raised through the sales to set up a shared platform for production of new domestically-made cars, Bourse Press quoted Hojjatollah Seyyedi, vice chairman of IKCO’s board of directors, as saying in December.

The platform the official was pointing to is part of a €70 million commercial agreement with Italy’s Pininfarina design house to establish a modular automotive platform able to house at least four different vehicles, and the first passenger car of the medium segment of the market.

Other local and foreign partners are included in the project, such as Mahle, Hyundai PowerTech, Punch Powertrain, Benteler Automotive, Sharif University of Technology and Amir Kabir University of Technology.

The 36-month deal by IKCO and Pininfarina will see a new concept architecture developed as well as a new design concept for future vehicles.

IKCO's broader goal is to produce 23 new models, including hatchback sedans and crossovers, which would make the country the largest producer and design center in the region.

The automaker, with a 49.3% share of the market, has had a good three quarters this fiscal year (March 21-Dec. 21) as it produced 510,297 units during the period, up 13% year-on-year, according to the Ministry of Industries, Mining and Trade's data. It is targeting to produce 575,000 units by the end of the year.

 Parts Makers Mull Foray Into Auto Production

Recent reports indicate that auto parts makers are vying to purchase IKCO’s shares. Equipment and component manufacturers already have stakes in Iran Khdoro and the addition of 15.8% will increase their influence on the board.

A Saturday report by the Persian economic daily Donya-e-Eqtesad said parts makers, having initially been rejected by IKCO, are planning to establish a consortium and bid for the sale once again.

They are also said to be aiming to make a foray into the auto production by acquiring other shares in the industry.

Rumors have it that Iran’s second largest automakers, SAIPA, is also mulling the sale of a part of its shares in Pars Khodro, the country’s third largest producer. The consortium in the making is also considering buying Pars Khodro, the report said.

However, SAIPA’s deputy head of communications has refused to acknowledge that the automaker plans to sell its shares or any of its subsidiaries. Mojtaba Nazari also told Mehr News Agency that SAIPA is currently focusing on “international cooperation and production projects … with the aim of increasing output, fostering development and diversifying SAIPA’s product portfolio.”