Craftsman Automation IPO is getting launched for subscription today on Monday 15, March 2021, and will be available for subscription till Wednesday, March 17, 2021. The company is looking to raise Rs.824 crore through public issue in an Offer for Sale of 45,21,450 lakh Equity Shares, Ahead of the IPO, the Craftsman Automation has already raised Rs 247 crore from 21 anchor investors.
The equity shares of Craftsman Automation are proposed to be listed on both BSE and NSE.
The Craftsman Automation IPO issue will be sold in the price band of Rs 1488-1490 per share and the minimum lot quantity is 10 shares and in multiples thereof translating to a minimum investment of Rs 14,900.
The latest Grey market premium price (GMP) for Craftsman Automation IPO’s were seen up by more than 12% and were trading around Rs.1690 as of today, This means people are expecting it to open on listing day to be at least at Rs.1680 or more.
Having said that, I would like to add here that many people underestimated Stovekraft IPO before it’s launch, however the share price made a high of Rs.545 above the pre-open IPO price band of Rs.384.
Likewise for HFFC (Home first finance) IPO, the GMP before launch was at about Rs.650 however the stock got listed at Rs.540 on the other hand for IRFC IPO many people recommended a BUY and GMP were also seen at quite high range but unfortunately it open at a discount price and is currently trading at Rs.25.40.
GMP does not mean in anyway a recommendation for an IPO, the financials of a company and its future prospectus tells a lot. Here is the thing no one can tell you whether the IPO will going to make a stellar debut or not, it is you who have to decide based on available information about the company.
Moreover the IPO’s now a days are very hot market every one wants to earn some quick money on listing day itself and there is nothing wrong about it.
Having said that, one must not forget to check the financials and do not fall for any recommendation from anyone, it is you hard earned money, you should decide whether to opt for the IPO or not.
You may watch various YouTube channels or read on different websites about recommendation for stocks and IPO, it is my humble suggestion and request please do not ever fall prey to it. Better than this is to invest in ETF’s?.
Therefore, whenever you are buying IPO make sure the money invested is not the one which you my need it urgently, always use extra money which you may not require in near future, Otherwise stay away completely.
Now, coming back to the Craftsman Automation IPO let us talk about in brief about the company and its financials and other details step by step.
About Craftsman Automation Limited (CAL):
Craftsman Automation Limited commenced operations in 1986 in Coimbatore, Tamil Nadu, India. The company owns and operates 12 strategically located manufacturing facilities across seven cities in India.
The company is a diversified Engineering company with vertically integrated manufacturing capabilities, engaged in three business segments, namely:
- Powertrain and other products for the Automotive segment
- Aluminium products for the Automotive segment
- Industrial and Engineering products
The company is the largest player involved in the machining of cylinder blocks and cylinder heads in the intermediate, medium and heavy commercial vehicles segment as well as in the construction equipment industry in India.
The company is among the top 3–4 component players with respect to machining of cylinder block for the tractor segment in India. The company is also present across the entire value chain in the Automotive-Aluminium Products segment, providing diverse products and solutions.
Within the Industrial and Engineering segment, it has utilised its in-house engineering and design capabilities and developed a diverse product portfolio across two sub-segments, namely:
The storage solutions sub-segment (under which it has the complete solutions for conventional/automated storage)
The high-end precision products sub-segment (under which it manufactures aluminium products for power transmission; high-end precision products; and undertakes sub-assembly, material handling equipment such as hoists, crane kits and industrial gears, manufactures gear and gear boxes, marine engines and accessories, special purpose machines, which includes metal cutting and non-metal applications such as washing and leak testing solutions and tool room, mould base and sheet metal).
The company has long-term relationships with several marquee domestic and global original equipment manufacturers and component manufacturers across its 3 business segments.
Within its Automotive – Powertrain and Others segment, its key customers include Daimler India, Tata Motors, Tata Cummins, Mahindra & Mahindra, Simpson & Co., TAFE Motors and Tractors, Escorts, Ashok Leyland, Perkins, Mitsubishi Heavy Industries, John Deere and JCB India.
Within its Automotive – Aluminium Products segment, its key customers include Daimler India, TVS Motors, Royal Enfield, Perkins and Mahindra & Mahindra. Key customers within its Industrial and Engineering segment include Siemens and Mitsubishi Heavy Industries.
Let us now talk about the financials of Craftsman Automation Limited in detail.
Financials Of Craftsman Automation Limited:
During the Financial Year (FY) 2019-20, the Company has achieved an operating income of Rs.1483.38 Crores as compared to Rs.1809.63 Crores in FY 2018-19.
The profit before tax for FY 2019-20 stood at Rs.53.55 Crores compared to Rs.137.96 Crores achieved in FY2018-19. The profit after tax stood at Rs.36.65 Crores for FY 2019-20 as compared to Rs.94.18 Crores for the previous year.
The Company’s consolidated revenue for FY 2019-20 was Rs.1492.46 Crores as compared to Rs.1818.00 Crores for the previous year. During the year under review, the consolidated profit after tax stood at Rs.40.01 Crores as compared to Rs.99.52 Crores for the previous year.
The Company’s continued efforts and marketing initiatives on Industrial and Engineering segment has enabled it to achieve a 5% growth in sales, Rs.516.40 Crores in the current year as compared to Rs.492.97 Crores last year. Due to the downfall in Automobile Industry, the performance of the Automotive segment has reduced only by 26% as compared to previous year.
The Company’s profit before tax and profit after tax has shown a drastic decline of 61% as compared to previous year from Rs.137.96 Crores to Rs.53.55 Crores and from Rs.94.18 Crores to Rs.36.65 Crores respectively.
Moreover, the company’s revenues are on declining mode in the last 3.5 years, The total assets of the company grew at a CAGR of 8.27% between 2017 and 2020. The long-term debt of the company grew at a CAGR of 15.47%.
This inconsistency was primarily due to considerable capital expenditure for setting up production units.
The company does not have any meaningful contingent liabilities. But it has disclosed capital commitments worth Rs 86.5 crore as of December 31, 2020. Based on the post-IPO enterprise value of Rs 3787 crore and annualised operating earnings of Rs 392 crore for FY21, the yield would be around 10.3%.
You can read the complete financial report for FY20 of Craftsman Automation Limited Here.
Craftsman Automation Peers Comparison:
Though Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) dropped by 5% for the year compared to Previous year, the EBITDA Margins on Turnover rebounded to 27% as compared to 24% in the previous year.
As per FY20 data, the stock would trade at a P/E of around 68-70, which is closer to its peers’ median P/E of 56 hence the IPO is valued correctly or can say slightly overpriced. At the upper end of its price band, the stock’s P/B ratio on a post-IPO basis is 3.4, which is lower than its peers’ average P/B of 5.0.
The average three-year (till FY20) ROCE was 15.5%, the ROE for the same period was 9.2%. The company’s short-term borrowings have declined from Rs 272 crore in FY 2018 to 156.7 crore as of December 2020. Given that 80% of the IPO proceeds are slated to be used for debt reduction, the outstanding borrowings should reduce further.
Craftsman has total borrowings of Rs 890 crore as on 9MFY21 with D/E ratio of 1.15x. CAL intends to utilize an aggregated Rs 120 crore from the net proceeds for repayment of debt.
This should result in decrease of debt to equity (D/E) ratio to 1x , It would still be higher as compared to key peers such as Bharat Forge (0.6x), Motherson Sumi Systems (0.5x), and Endurance Tech (net cash).
One need to understand here, this is happened with all the companies which are in AUTO sector in last couple of years, Covid-19 has added further decline in the industry, TATA Motors is a prime example.
The company has been following a stable accounting policy and none of the shares of the promoter are pledged. Moreover, the bulk of the CAPEX required has already been incurred by the company in the last three to four years.
Craftsman Automation IPO Details:
Object of the Offer:
The proceeds will be used to repay certain borrowing and for general corporate purposes.
• QIB – 50% of the offer – ₹ 412 crores
• NIB – 15% of the offer – ₹ 124 crores
• RET – 35% of the offer – ₹ 288 crores
Frequently Asked Question (FAQ):
1.What Is The Symbol For Craftsman Automation Limited (CAL)?
Ans: The Symbol for Craftsman Automation Limited is CRAFTSMAN
2.When Craftsman Automation IPO Coming?
Ans: The Issue Period for Craftsman Automation IPO is 15-Mar-2021 to 17-Mar-2021.
3. Post Modification Period For Craftsman Automation IPO?
Ans: The Post issue Modification Period for IPO is 18-Mar-2021 (10.00 A.M. to 11.00 A.M.).
4. What Is The Cut-off Time Period For UPI Mandate For Craftsman Automation IPO?
Ans: The Cut-off time for UPI Mandate Confirmation is 18-Mar-2021 (upto 12:00 PM).
5. What Is The Issue Type For Craftsman Automation IPO?
Ans: The Issue Type is 100% Book Building.
6.What Is The Price Band For Craftsman Automation IPO?
Ans: The Price (Band) Range for Craftsman Automation IPO is Rs.1488 to Rs.1490 per equity share.
7. What Is The Lot Size For Craftsman Automation IPO?
Ans: The Bid Lot i.e. Minimum Order Quantity (lot size) for Craftsman Automation IPO is of 10 Equity Shares and in multiples thereof 10 Equity Shares.
8. Who Are The Book Running Lead Managers For Craftsman Automation IPO?
Ans: The Book Running Lead Managers are, Axis Capital Limited and IIFL Securities Limited
9. What Is The Face Value For Craftsman Automation IPO?
Ans: The Face Value is of Rs.5 whereas The Tick Size is of Rs.1
10. What Is The IPO Market Timings For Craftsman Automation IPO?
Ans: The IPO Market Timings is 10.00 a.m. to 5.00 p.m.
Apart from above points:
The Maximum Subscription Amount for Retail Investor is Rs. 2,00,000
The Maximum Bid Quantity for QIB Investors is 38,69,710 equity shares in multiple of 10 Equity Shares
The Maximum Bid Quantity for NIB Investors is 27,64,080 equity shares in multiple of 10 Equity Shares
The Name of the Registrar is Link Intime India Private Limited
The Contact person name number and Email id is Shanti Gopalkrishnan, +91 22 4918 6200, [email protected]
The Address of the Registrar is C101, 247 Park, L.B.S. Marg, Vikhroli (West), Mumbai – 400 083, Maharashtra
Where To Check Craftsman Automation IPO Application And Allotment Status?
As an investor or trader generally we are curious and anxious to know the results of the application as soon as possible. To ease the anxiety, both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) have come up with dedicated pages and links which investors can use.
The NSE has an IPO bid verification module. It can be used to verify the IPO application details uploaded on the exchange bidding system by your member/bank. The data of the bid details uploaded by the member/bank would be available on T+1 day (where T would be date receipt of bid on NSE platform).
In addition, the data would be available until six days after the issue closure date. This gives the investor enough time to verify the data and instruct the member/bank to make any changes, if required.
Exchange will also provide allotment information as provided by the registrar to the issue.
An investor can avail this facility by registering using his/her PAN details. After registration, the investor will receive an email notification from NSE on the registered email address. That email will provide the login details.
The following link can be used for the same:
The BSE has also come up with a similar platform.
This unique facility allows investors to verify the status of their application submitted to a Trading Member or a SCSB (Self-Certified Schedule Banks).
The investor can check his application status/information on the website until one week after issue close.
The following link can be used by investors:
Important Things To Keep In Mind Before Applying For IPO’s:
- Try to fill for the same IPO online from different DP ID i.e. if in your family have more than 1 account you can possibly get the allocation done in case of over subscription.
- You should have a good knowledge of the sector and the company you are planning to invest.
- Analysis of the company’s balance sheet is very crucial. A clear understanding of the company’s future projects and vision is very necessary to know whether it will have a sustainable future.
- Investment decision has to be taken carefully and not in a hurry.
- Read as much as you can about the company, its objectives for launching the IPO, its past history in business and its futures prospectus.
- Don’t go for hype in the news, your analysis should be based on facts rather than gossips and rumors.
- Many IPOs are oversubscribed. What this means is that the demand for shares is much higher than the shares available for sale. In such a situation, it is no surprise that many investors fail to get any shares allotted to them. This is why it is advisable to apply for IPO shares on the last day of bidding. This way, one can have a good estimate on how large the subscription will be. Also, in that case, one should bid for just one lot and not unnecessarily lock up their capital.
Auto component exports are projected to rise at 3-5% CAGR between fiscal 2020 and 2024 after seeing a two year consecutive decline in fiscal 2020 and 2021. As India is moving towards higher global standards in terms of quality and safety measures. This helps players to expand into newer geographies and gives them an edge
compared with other low-cost countries.
MHCVs and tractors comprise over 70% in the overall revenue pie of the company. Besides, both the segments together contribute around 51% of the total share of domestic automotive powertrain industry.
Further, auto aluminium and storage solution divisions contribute 21% and 6% of the total revenue, respectively. “Given robust growth opportunities, these business divisions are at a nascent stage in India as compared to global industries and the company can harness the opportunities in both segments.
Let us look at some of the strength and risk factors of Craftsman Automation Limited (CAL):
Some of the qualitative factors and strengths of Craftsman Automation Limited IPO
- The company is the largest manufacturer of cylinder blocks and cylinder heads in the construction equipment industry and intermediate, medium & heavy commercial vehicles segments.
- It is also one of the top four-component manufacturers of cylinder blocks for the tractor segment and has long-term relationships with major OEMs.
- The company has already incurred a substantial portion of the required capital expenditure for all of its three segments and expects to incur only incremental maintenance-related expenses, going forwards.
- The company has one of the highest EBITDA margins in the industry, which the management attributes to its business model. Its business model involves carrying a lesser amount of inventory on its balance sheet than peers.
- The company’s storage-solution business grew at a CAGR of 204% during the last financial years and contributed around 6% to the company’s topline for the nine months during the current fiscal.
- The storage-solutions industry has grown at a CAGR of 14-16% during the last five financial years and is expected to grow at a CAGR of 19-21% over the next three years. This segment is also very profitable, with an EBITDA margin of around 30%.
Some of the Risk Factor for Craftsman Automation Limited IPO
- Except for the storage-solutions segment, the company predominantly manufactures components for fossil fuel-based engines (petrol, diesel, etc.). As electric vehicles (EVs), which don’t rely on traditional Internal Combustion Engines, is gaining more popularity, the company’s products risk becoming obsolete.
- The switch to EVs is not expected to affect the company in the near term, EV technology is expected to gain traction in the non-PV segment (in which the company operates) only after dominating the PV space. But the threat of a faster adoption cannot be ruled out.
- The sector in which the company operates is cyclical in nature and is currently going through a rough patch. Even before the COVID-19 pandemic, the sector faced headwinds in the forms of BS-VI emission norms, an increase in costs due to longer duration insurance policies and credit problems.
- The sector was severely affected by COVID-19 and it remains to be seen when the sector will be able to recover. This has clearly impacted the company and its effect is evident in its declining revenue in the last three years.
- Given the nature of the business, the company has a high reliance on a small number of customers. The top four customers accounted for 43% of the company’s revenue in the current fiscal and the top ten customers accounted for nearly 60%
- The resulting lower bargaining power is also, perhaps, evidenced by increasing receivables, which shot up from 11% of its revenue in FY19 to 21 per cent in the current fiscal.
Therefore, it is always advisable to go through Craftsman IPO – RHP to know in detail about the company.
The only thing which should be bothering you is the research you did before applying for the IPO. Investing in IPO is risky as well as profitable. Having said that you also need to keep in mind important things mentioned above before applying to IPO’s as the risk is always involved.
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Note: Please do your own research and make investment. Moneycontain will not be responsible for any of your losses at all. The point made is for educational purpose only and intended to give information. All investments are subject to risks, which should be considered prior to making any investments. The above details are compiled from information available on public platforms. These are not buy or sell recommendations.