Synopsis

The Craftsman Automation IPO comprises a fresh issue of equity shares aggregating up to Rs 150 crore, and an offer for sale of up to 45,21,450 shares by the promoter and existing shareholders.

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Retail investors can bid for a maximum of 13 lots.

NEW DELHI: The Rs 824 crore initial public offer (IPO) by auto component maker Craftsman Automation kicked off on Monday and was subscribed 55 per cent at the end of the first day of bidding process.

Investors bid for 21,31,410 shares out of the 38,69,714 shares being offered by the compay in the primary market offer.

The issue is being sold in the Rs 1,488-1,490 price band, and investors can subscribe to it by betting for a lot of 10 shares or in multiples thereof. Retail investors can bid for a maximum of 13 lots.

The IPO comprises fresh issue of equity shares aggregating up to Rs 150 crore and an offer for sale of up to 45,21,450 shares by the promoter and existing shareholders. On Friday, the company raised a little over Rs 247 crore from 21 anchor investors.

ICICI Securities said Craftsman Automation is a play on revival in automotive industry, especially M&HCV space. With a lumpy capex cycle behind it and focus on debt reduction, it is well poised to clock healthy returns ratios in FY22-23. At IPO price, it is offered at reasonable forward valuations, the brokerage said and suggested a subscribe rating on the issue.

The company counts Daimler India, Tata Motors, Ashok Leyland, M&M, TAFE, Escorts, John Deere, JCB India, TVS Motors, Royal Enfield among its top clients. Its clientele in industrial & engineering segments includes Siemens and Mitsubishi Heavy Industries. Top 10 customers constituted 59 per cent of the companys sales during the first nine months of FY21. Over 50 per cent of the sales come from clients that were associated with the company for 10 years or more.

Craftsman Automation is a company with vertically integrated manufacturing capabilities, engaged in three business segments, namely Automotive - Powertrain and Others, Automotive – Aluminium Products and Industrial and Engineering. It is one of the leading players in machining of cylinder blocks for the tractor segment.

“In terms of valuation, the pre-issue P/E works out to 73 times FY20 earnings (at the upper end of the issue price band), which is high considering its historical two-year CAGR top-line and bottom-line growth. Further, the company’s return ratios are also low compared with its peers. Thus, we recommend a ‘neutral’ rating on the issue,” said Amarjeet Maurya - AVP - Midcaps, Angel Broking.

Ashwin Patil of LKP Securities said despite rich valuations he would recommend investors to ‘subscribe’ to the IPO, considering its visibility of top line growth, competitive edge, superior profitability compared with its peers, prudent cost management, strong return ratios, wide clientele spread across the globe, sound R&D base and technological progress.”

( Originally published on Mar 15, 2021 )

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