BackLaxmi Organic ends at 26% premium, Craftsman makes tepid debut
The IPO of Laxmi Organic Industries was subscribed 107 times in the price band of Rs129-130
PremiumMUMBAI : Two stocks made a mixed debut on the exchanges on Thursday with the overall markets in a sell-off mode fuelled by concerns of a resurgence in coronavirus cases. Shares of Laxmi Organic Industries closed at a premium of 26.50% at ₹164.45 over the issue price of ₹130. The stock opened for trade at ₹155.50 on the national stock exchange (NSE). The initial public offering (IPO) of Laxmi Organic was subscribed 107 times in the price band of ₹129-130. The firm produces acetyl intermediates and specialty intermediates.
“Based on FY20 earnings, Laxmi Organic is priced at a price-to-earnings of 42 times at the upper end of the price band along with a good return on equity of 16.4%," Angel Broking said in a 12 March report.
Meanwhile, auto parts maker Craftsman Automation made a tepid listing as it closed 3.6% lower at ₹1435.60 from its issue price of ₹1490. The stock was listed at ₹1,359, a 8.79% discount to its issue price.
The ₹823 crore IPO was subscribed 3.82 times. Ahead of the issue, Canara Bank Securities said Craftsman Automation looked expensive compared to its peers in terms of its price-to-earnings of 48.44 times and price-to-book of 4.19 times during April-December 2020.
Brokerage firm Prabhudas Lilladher expects Craftsman Automation’s mid-term growth drivers to stay intact due to its strong reliance on medium and heavy commercial vehicles, and tractors, which are showing a revival. However, challenges such as limited product offerings in two-wheelers, three-wheelers and personal vehicles, debt to equity ratio of 1.15 times (one of the highest across auto ancillary space) and the firm’s inability to de-risk its automotive powertrain division are clear deterrents in the long run, it said.
“Against these headwinds, an anticipated post IPO valuation (27-30 times of FY23 EPS) on upper band of ₹1,490 issue price, looks iniquitous. This, we believe is not cheap as compared to other ancillary. Listing gains in our view looks obscure," Prabhudas Lilladher said in a note on 13 March.
Craftsman Automation counts Daimler India, Tata Motors, Ashok Leyland, M&M, TAFE, Escorts, John Deere, JCB India, TVS Motors and Royal Enfield among its automotive customers.
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