Craftsman Automation IPO in progress: Should you subscribe to the share sale?

Leading engineering firm Craftsman Automation's IPO opened today. Price band of the IPO has been fixed at Rs 1,488 to Rs 1,490 per equity share. It plans to raise Rs 150 crore through the IPO.

The IPO comprises 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.

The company plans to utilise funds collected from IPO towards the following objectives; 1. To make reapayment/pre-payment of company's borrowing fully or partially. 2. To meet general corporate purposes.

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Lot size of the IPO is 10 shares at a cost of Rs 14,900. A retail-individual investor can apply for up to 13 lots (130 shares or Rs 193,700).

The IPO will close on March 17. Link Intime India Private Ltd is the registrar for the IPO. The shares are proposed to be listed on BSE and NSE.

The book running lead managers to the issue are Axis Capital Ltd and IIFL Securities Ltd,

Craftsman Automation share is likely to list on March 25, 2021. Qualified institutional buyers (QIBs) can subscribe up to 50 per cent of the net issue, 15 per cent of the issue is reserved for non-institutional investors and the remaining 35 per cent for the retail category.

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Amarjeet Maurya - AVP - Mid Caps at Angel Broking gave a neutral rating to the issue.

"In terms of valuations, the pre-issue P/E works out to 73x FY2020 earnings (at the upper end of the issue price band), which is high considering CAL's historical two year CAGR top-line & bottom-line growth. Further, the company's return ratios are also low compared to its other peers. Thus, we recommend NEUTRAL rating on the issue," he said.

Geojit in a note gave a subscribe call to the issue. "At   the   upper   price   band   of   Rs 1,490,   CAL   is   available   at   a   PE   of   46.6x (annualized  basis  on  FY21E  EPS  of  31.9)  which  is  aggressively  priced. GoI's 'Make  in  India' initiative and  other  regulatory  and  policy  supports with well established  relationships  with  domestic  and  global  OEMs are  positive  for  the company. We  assign  a  Subscribe  rating,  with  a  long  term  perspective, on  the back of healthy growth in the OEM segment  due to lower base and reduction in debt," the brokerage said.

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Craftsman Automation Ltd , which was incorporated in 1986, is engaged in manufacturing precision components. The company designs, develop, and manufactures a range of engineering products. It is one of the leading players in the machining of cylinder blocks for the tractor segment.

The company owns 12 state-of-the-art manufacturing facilities across 7 cities of India. Its customer base includes Tata Motors, Daimler India, Tata Cummins, Mahindra & Mahindra, Royal Enfield, Siemens, Escorts, Ashok Leyland, VE Commercial Vehicles, TAFE Motors & Tractors, etc.