The Rs 824-crore public issue of Craftsman Automation, a diversified engineering company with vertically integrated manufacturing capabilities, has subscribed 3.33 times so far on March 17, the final day of bidding, as it received bids for 1.28 crore equity shares against the offer size of 38.69 lakh equity shares.
As per the subscription data available on the exchanges, the portion set aside for retail investors has seen a subscription of 3.28 times and that of non-institutional investors 1.25 times.
The qualified institutional buyers have to put in 5 times bids more than reserved portion.
Craftsman Automation is 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 aimed to raise Rs 824 crore through public issue and of that it already mopped up Rs 247 crore from anchor investors on March 12, at higher end of price band of Rs 1,488-1,490 per share.
Craftsman is the largest player involved in the machining of cylinder blocks and cylinder heads in the intermediate, medium and heavy commercial vehicles segment as well as in the construction equipment industry in India. It also owns and operates 12 strategically-located manufacturing facilities across seven cities in India.
"We believe Craftsman Automation IPO offer gives investors an investment opportunity in a diversified industrial & engineering company involved in designing, processing, and OEM manufacturer which is a leader in cylinder blocks & heads," said Mehta Equities which is optimistic about this sector as demand would rise due to the use of aluminum auto products to reduce weight as well as to meet BSVI emission norms wherein Craftsman has a strong presence with a decent market share.Considering its well-diversified presence in automobile segments and long-standing relationships with marquee customers with a global presence, Craftsman is well placed to tap the sector growth but one should also consider a few risks before making an informed decision to invest in this IPO that would be like high debt on books with low-profit margins, high competition in domestic as well as global markets which can keep margins under lower single digit, exposure to the cyclicality of automobile business with changing BS norms and rise in focus towards EV vehicles which would reduce components demand, said the brokerage.
On valuations parse at upper price band Rs 1,490, the issue is asking for a market cap of Rs 3,148 crore with the price-earnings ratio at 44x FY21E annualized earnings versus industry average P/E at around 72x and on P/BV ratio the company is asking for 4x FY21 annualized book value versus 4.9x industry average which seems this IPO offer is priced on industry average, the brokerage added.
Also read - Craftsman Automation IPO: Should you subscribe?
Mehta Equities feels risky investors can 'subscribe with caution' as risk concerns weigh more over rationales, while conservative investors can give a miss on this offer.
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