The ₹823 crore initial public offering (IPO) was subscribed 3.82 times during the share sale on 15-17 March
Canara Bank Securities said that the company looked expensive in comparison to its peers
Mumbai: Shares of auto component maker Craftsman Automation made a weak debut on the exchanges on Thursday. The stock was listed at ₹1359 on the National Stock Exchange, 8.79% lower than its issue price of ₹1490.
The ₹823 crore initial public offering (IPO) was subscribed 3.82 times during the share sale on 15-17 March. Net proceeds of the IPO will be utilised to make repayment and pre-payment of the company's borrowing fully or partially and to meet general corporate purposes.
Ahead of the issue, Canara Bank Securities said that the company looked expensive in comparison to its peers in terms of price to earnings (PE) ratio of 48.44 times and price to book ratio of 4.19 times for nine months of FY21.
“Craftsman Automation is a play on revival in automotive industry, especially M&HCV space. With lumpy capex cycle behind it & 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," said ICICI Direct.
Due to revival of business cycle as it has high dependence on MHCV and tractors, Prabhudas Lilladher believes mid-term growth drivers will remain intact. However, challenges such as limited product offering in two and there wheelers and personal vehicles, debt to equity ratio of 1.15 times (one of the highest across auto ancillary space) and company’s inability to de-risk its automotive powertrain division, stands as 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. Lsting gains in our view looks obscure," Prabhudas Lilladher said in a note on 13 March.
In the automotive segment, its key clients include Daimler India, Tata Motors, Ashok Leyland, M&M, TAFE, Escorts, John Deere, JCB India, TVS Motors, Royal Enfield, among others. Its clientele in industrial & engineering segments includes Siemens and Mitsubishi Heavy Industries.
Craftsman Automation is a diversified engineering company. It is the largest component manufacturer engaged in the machining of cylinder heads and cylinder blocks in the construction equipment industry as well as in the IMHCV segment of the commercial vehicle Industry. Craftsman has three business segments, automotive, powertrain and others segment. Automotive – Aluminium products, industrial and Engineering segment and contributed about 51.21%, 21.10% and 27.69% of total revenue from operations in nine months of FY21, respectively.
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