Craftsman Automation IPO opens March 15; check issue size, price band, other details

Craftsman Automation Ltd Rs 824- crore IPO (initial public offering) will open for subscription on March 15, 2021. The company has fixed price band at Rs 1,488-1,490 per share of face value of Rs 5 each. The public issue comprises a fresh issue of equity shares worth Rs 150 crore and offer-for-sale (OFS) of up to 45.21 lakh equity shares by promoters and existing shareholders. Srinivasan Ravi, K Gomatheswaran, Marina III (Singapore) Pte Ltd and International Finance Corporation will sell shares in the OFS. The book running lead managers to the issue are Axis Capital Ltd and IIFL Securities Ltd, while Link Intime India Private Ltd is the registrar to the public issue.

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Who can invest how much?

Investors can bid for a minimum of 10 equity shares and in multiples thereafter, implying a minimum investment amount of Rs 14,900 per lot. Up to 50 per cent of the net issue will be reserved for the qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 35 per cent for the retail category. Upon listing, Craftsman Automation will join listed industry peers such as Bharat Forge Ltd, Endurance Technologies Ltd, Jamna Auto Ltd, Mahindra CIE Automotive Ltd, Minda Industries Ltd, Sundram Fasteners Ltd and Ramkrishna Forgings Ltd. Ramkrishna Forgings Ltd has the highest P/E ratio of 181.89x and Mahindra CIE Automotive Ltd the lowest 17.40x.

The average industry P/E ratio stands at 72.76x. AR Ramachandran, Co-founder & Trainer, Tips2Trades, told The Outlooker Online that Craftsman Automation, despite having a very strong customer base, the financials and ratios are not at all attractive enough to justify current valuations. “Traders can opt for listing gains only but investors are advised to buy only after a significant correction post IPO,” he said.

What does Craftsman Automation do?

The net proceeds from the Craftsman Automation issue will be used towards repayment/pre-payment, in full or part, of certain borrowings availed of by the company; and for general corporate purposes. Craftsman Automation Limited 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 and industrial and engineering products segment. The company is present across the entire value chain in the Automotive-Aluminium Products segment, providing diverse products and solutions. Its strong in-house engineering and design capabilities help them to offer comprehensive solutions and products to our long standing domestic and international customers in each of the segments.

Should you subscribe to Craftsman Automation?

Manthan Mehta, Head Unlisted & Private Equity Rurash Financial Services Pvt Ltd, told The Outlooker Online, that from the valuation perspective, company is commanding PE of 73x of FY20 EPS and 44x of FY21E EPS at the upper price band of Rs 1,490, which seems to be slightly overpriced. However, one can apply for IPO gains. Along with Craftsman Automation, the major organised players in the aluminium die casting industry include Rockman Industries, Sunbeam Auto Private, Alicon Castalloy, Sundaram Clayton, and Endurance Technologies. Craftsman Automation Limited 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. While in case of the tractor Industry Craftsman is among the top 3-4 component manufacturers with respect to cylinder block machining.

(The recommendations in this story are by the respective research and brokerage firm. The Outlooker Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)