Craftsman Automation IPO Review – Should you Subscribe?
Chennai based Craftsman Automation IPO would open for subscription on 15th March, 2021. Craftsman Automation is India’s leading diversified engineering company with vertically integrated manufacturing capabilities. Company revenues and margins are on declining mode. Should you invest in Craftsman Automation IPO? In this article we would provide Craftsman Automation IPO dates, IPO Price band, market lot, reasons to invest, risk factors, IPO Price valuations and final review whether one should invest or avoid.
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About Craftsman Automation Limited
They are 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.
They are the largest player involved in the machining of cylinder blocks and cylinder heads in the intermediate, medium and heavy commercial vehicle segment as well as in the construction equipment industry in India.
They are among the top three-four component players with respect to the machining of cylinder block for the tractor segment in India. They are present across the entire value chain in the Automotive-Aluminium Products segment, providing diverse products and solutions.
Craftsman Automation competitive strengths
1) Leading engineering product manufacturer.
2) Strategically located and vertically integrated manufacturing facilities.
3) Strong product design capabilities.
4) Robust financial performance.
Craftsman Automation IPO Dates, Price Band and Issue Details
| IPO Opening Date | 15-Mar-21 |
| IPO Closing Date | 17-Mar-21 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 5 per equity share |
| IPO Price band | Rs 1,488 to Rs 1,490 per equity share |
| Market Lot | 10 Shares |
| Min Order Quantity | 10 Shares |
| Listing at | BSE and NSE |
| Issue Size | Total Rs 823.7 Crores i) Fresh issue – 150 Crores ii) OFS – 673.7 Crores |
Note: Craftsman Automation IPO Price Band is confirmed now
Craftsman Automation Limited IPO DRHP
Objects of issue
Here are the objects of the IPO issue.
1) Offer for Sale (OFS) – In this, selling shares, holders would sell their share holding and company would not get any proceeds from this issue.
2) To make repayment/pre-payment of the company’s borrowing fully or partially.
3) To meet general corporate purposes.
Who are the company promoters?
Mr Srinivasan Ravi is the promoter of this company.
Company Financial Performance
Here are the consolidated revenue and profit details in the last 3 years and 6 months.
| For the year / Period ending | Total Revenues (Rs in Millions) | Profits after tax (Rs in Millions) |
Profit % |
|---|---|---|---|
| Mar-2018 | 15,228.6 | 315.3 | 2.1% |
| Mar-2019 | 18,316.4 | 973.6 | 5.3% |
| Mar-2020 | 15,010.5 | 410.7 | 2.7% |
| 6 Months ending Sep-20 | 5,365.2 | 69.6 | 1.3% |
Its EPS for FY2020 is Rs 20.4 and last 3 years average EPS is Rs 28.95.
Why to invest in this IPO?
Here are a few reasons to invest.
Craftsman Automation is a diversified engineering company in India with vertically integrated manufacturing capabilities.
Risk Factors of investing in this IPO
1) Company revenues are on declining mode in the last 3.5 years
2) Company profits have fallen in the last 3 years and 6 months
3) The continuing outbreak of covid-19 is uncertain and can impact company business in the future too
4) There is a significant decline in automobile sales prior to Covid-19 and post covid-19 lockdowns, hence one cannot say when it would recover completely
5) A substantial portion of the company assets are hypothecated / mortgaged in favor of lenders as security of company borrowings. If the company fails to service its debt obligations, its lenders may enforce the security which can impact company business
6) Its group companies have incurred losses in the last 3 years
7) For complete internal and external risk factors, you can refer the RHP of the company
Craftsman Automation IPO Dates / Time Table / IPO Schedule
| Offer Open | 15-Mar-21 |
| Offer close | 17-Mar-21 |
| Finalization of Allotment | 22-Mar-21 |
| Initiation of Refunds | 23-Mar-21 |
| Credit to Demat Account | 24-Mar-21 |
| IPO Shares Listing Date | 25-Mar-21 |
How to apply this IPO?
You can login to your demat account, visit IPO section and click on the IPO link of Craftsman Automation Limited. You can then enter minimum lot quantity and price band and then submit.
IPO Price Valuations
Craftsman Automation IPO Price band is Rs 1,488 to Rs 1,490.
1) On the upper price band of Rs 1,490 and EPS of Rs 20.4 for FY20, the P/E ratio works out to be 73x.
2) For the last 3 years average EPS of Rs 28.95, the P/E ratio is 51x.
3) If we annualize its 6 months ending Sep-20 EPS for FY21, the P/E works out to be 217x.
4) Means, the company asking price of Rs 1,485 of the upper price band in the P/E range of 51x to 217x.
5) There are listed peers like Ramkrishna Forgings trading at P/E 157x (Highest) and Mahindra CIE Automative at P/E 17x (Lowest) and the industry average is 60.7x. Hence Craftsman Automation share price of Rs 1,490 is overpriced.
Craftsman Automation IPO GMP
Grey Market Price (GMP) of this IPO would be updated soon.
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Craftsman Automation IPO Review – Should you invest?
Craftsman Automation is a diversified engineering company in India with vertically integrated manufacturing capabilities.
Company revenues and margins are on declining mode.
Craftsman Automation IPO price is over priced.
I would recommend investors to avoid this IPO considering all these negative factors.
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Thanks suresh.
in the recent IPO releases most of them are not reasonably priced and trend is very aggressive or it is ended with listing gains. Can you please share your view point on the recent trends.
There is no trend. It is simple that investors are not worried about fundamentals any more in this bull run. This perception might change in later, but we can’t say