Decoding Jyoti CNC Automation IPO – A Comprehensive Analysis

Jyoti CNC Automation Limited is set to launch its Initial Public Offering (IPO) to raise Rs 1,000 crore. The IPO, opening on January 9, 2024, and closing on January 11, 2024, aims to issue 3.02 crore fresh shares. The company specializes in manufacturing and supplying CNC machines, with a diverse product range catering to industries worldwide.

About Jyoti CNC Automation Limited

Jyoti CNC Automation is a prominent manufacturer and supplier specializing in the production of metal-cutting computer numerical control (CNC) machines.

Its diverse customer base includes reputable entities such as ISRO, BrahMos Aerospace, Turkish Aerospace, Tata Group, Bharat Forge, and more.

Operating from three manufacturing facilities, two located in Rajkot, Gujarat, and one in Strasbourg, France (acquired in November 2007 through the acquisition of Huron Graffenstaden SAS), the company holds the third-largest market share in India, constituting approximately 10 percent in fiscal 2023.

Furthermore, on a global scale, it ranks 12th with a market share of 0.4 percent in the calendar year 2022. This positioning underscores Jyoti CNC Automation’s significance in the CNC machine industry and its international reach.

Jyoti CNC Automation IPO Details

  • Issue Period: January 9, 2024, to January 11, 2024
  • Listing Date: Tentatively set for January 16, 2024
  • Price Band: Rs 315 to Rs 331 per share
  • Lot Size: 45 shares
  • Total Issue Size: 30,211,480 shares, aggregating up to ₹ 1,000.00 Cr
  • Fresh Issue: 30,211,480 shares, aggregating up to ₹ 1,000.00 Cr
  • Employee Discount: Rs 15 per share
  • Listing Platforms: BSE, NSE
  • Face Value: Rs 2 per share

Objective of the IPO

The net proceeds from the fresh issue will be utilized for:

  • Repayment and/or pre-payment of certain borrowings.
  • Funding long-term working capital requirements.
  • General corporate purposes.

Financial Summary

Period Ended 31-Mar-21 31-Mar-22 31-Mar-23 30-Sep-23
Assets 1,388.19 1,286.24 1,515.38 1,706.07
Revenue 590.09 750.06 952.6 510.53
Profit After Tax -70.03 -48.3 15.06 3.35
Net Worth 18.67 -29.68 36.23 205.63
Reserves and Surplus 83.11 11.67 49.14 213.33
Total Borrowing 725.12 792.16 834.97 821.4

Jyoti CNC Automation IPO  – Reasons to Invest

  • Industry Demand: Growing demand in the CNC machine industry.
  • Order Book: Strong order book of ₹3,315.33 crore to be executed over the next few years.
  • Debt Reduction: Plans to use IPO proceeds to repay debt, improving financial risk profile.
  • Diverse Customer Base: Major clients include ISRO, BrahMos Aerospace, Turkish Aerospace, and more.

Jyoti CNC Automation IPO – Risk Factors

  • High Valuation: P/E ratio at upper price band is 324.51 times for FY23.
  • Volatile Financials: Recovering from historic losses.
  • Lower Return Ratios: RoE and RoCE relatively low compared to peers.
  • Debt-to-Equity Ratio: Stands at 10.17x in FY23.

What Stock Market experts saying about this IPO?

  • As per Anand Rathi, the recommendation to subscribe for the long term is grounded in the belief that Jyoti CNC Automation IPO is fairly priced, despite a high P/E of 374.22x and EV/EBITDA of 85.59x. The majority allocation of IPO proceeds to debt repayment is anticipated to positively impact profitability, coupled with revenue visibility from the lucrative aerospace and defense industries.
  • An endorsement from Reliance Securities suggests subscribing for the long term, with a focus on Jyoti CNC’s enhanced market share, industry demand growth, diversified presence, and a substantial order book of Rs 3,310 crore. The recommendation is fueled by confidence in the company’s strategic moves, including debt reduction, fostering a favorable outlook for the long term.
  • Mehta Equities advises subscribing for the long term, emphasizing the recovery from historic losses. They caution against sole dependency on P/E valuation, proposing analysis based on a reasonable Price to Book Value of 6.2x FY24 annualized, compared to industry averages. Investors are encouraged to consider Jyoti CNC Automation IPO for its long-term potential and strategic recovery measures.

Jyoti CNC Automation IPO Grey Market Premium (GMP)

Investor sentiment towards Jyoti CNC Automation IPO is reflected in the Grey Market Premium (GMP) as follows:

  • As per Livemint, the shares of Jyoti CNC Automation Ltd are trading at a premium of Rs 76 in the grey market.
  • As per Moneycontrol article, the Grey Market Premium (GMP) surged by Rs 96, indicating a 29 percent increase over the issue price of Rs 331. This implies a potential listing price of Rs 426.
  • IPO Watch reports a GMP of Rs 95 for Jyoti CNC Automation IPO.
  • Chittorgarh provides Day-wise IPO GMP Trend that indicates fluctuations. On January 9, the GMP decreased to Rs 72, down from the previous day.

Jyoti CNC Automation IPO – Should you subscribe?

  • Despite the sky-high valuation and volatile financials, many analysts are recommending subscribing to the Jyoti CNC Automation IPO for the long term. The company’s focus on debt reduction, a strong order book, and positive industry trends contribute to a favorable outlook.
  • However, investors should carefully consider the risk factors, including the high valuation and the company’s recovery from past losses, before making an investment decision.

High Risk Investors who understand all these pros and cons can invest in this IPO.

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