Craftsman Automation IPO: Here’s All You Need To Know
Craftsman Automation Ltd. (image: Company website)

Craftsman Automation IPO: Here’s All You Need To Know

Craftsman Automation Ltd. will launch its three-day initial public offering on March 15, first by an auto components firm in the last three years.

The proposed Rs 824-crore initial public offering comprises a fresh issue of shares worth Rs 150 crore, and an offer-for-sale of up to 45 lakh equity shares by promoters and existing investors, according to its red herring prospectus. The proceeds will be used to repay certain borrowing and for general corporate purposes.

The price band has been fixed at Rs 1,488-1,490 apiece. The company, in its filings, said up to 50% of the net offer will be reserved for qualified institutional buyers, 15% for non-institutional buyers and the remaining for retail investors.

Key Details

  • Issue open: March 15-17.
  • Face value: Rs 5 per share.
  • Price band: Rs 1,488-1,490.
  • Fresh issue: Aggregating up to Rs 150 crore.
  • Offer for sale: Rs 673
  • Minimum bid size: 10 equity shares.
  • Listing: National Stock Exchange and BSE.
  • Book running lead managers: Axis Capital, IIFL securities and Link Intime.

Business 

Established in 1986 and based in Coimbatore, the diversified engineering company is engaged in three segments:

  • Powertrain and other products for the automotive segment.
  • Aluminium products for the automotive segment.
  • Industrial and engineering products segment.

Present across the entire value chain in the automotive-aluminium products segment, it designs, develops, and manufactures a wide range of engineering products. It is one of the leading players in the machining of cylinder blocks for the tractor segment.

The firm has 12 vertically integrated manufacturing facilities across seven cities in India, with a total built-up area of over 1.5 million square feet.

The company counts all major automakers and key players in the industrial segment as its key clients. In the automotive segment, these include Tata Motors Ltd., Ashok Leyland Ltd., Daimler India Commercial Vehicles Pvt., Mahindra & Mahindra Ltd., Escorts Ltd., JCB India Ltd., TVS Motors Ltd., Royal Enfield (Eicher Group), among others. Its clientele in industrial and engineering segments includes Mitsubishi Heavy Industries Ltd., Voith Turbo Siemens, among others.

Top 10 customers account for 59.15% of its revenue.

Objective 

The company plans to use the proceeds of the IPO to repay or pre-pay the company's borrowing fully or partially, and to meet general corporate purposes.

Financials 

For the nine months ended December 2020, Craftsman Automation reported revenue worth Rs 1,023 crore. Its Ebitda margin stood at 28.1%, while profit was Rs 50 crore.

Competition

Craftsman Automation operates faces competition from competitors, both domestically and internationally, with the likes of Bharat Forge Ltd., Jamna Auto Industries Ltd., Ramkrishna Forgings Ltd,, Endurance Tech Ltd.

Risk Factors

  • The extent to which the coronavirus causes disruption in the automobile sector.
  • Impact of the slowdown in the automobile business which had begun even before the pandemic, and how and when the sales will recover after Covid.
  • Powertrain and allied business prone to electric vehicle risk.
  • Lack of long term contracts or exclusive arrangements with any of the suppliers.
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