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Home >Markets >Ipo >Laxmi Organic ends at 26% premium, Craftsman makes tepid debut

MUMBAI : 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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