Craftsman Automation IPO is going to list tomorrow on the exchanges. Craftsman Automation IPO was subscribed 3.82 times. The public issue subscribed 3.44 times in the retail category. Analysts believe that the valuations of the company were placed on a higher side, leaving nothing much on the table for Investors. They expect the listing price to be 5% to 10% above the issue price. Due to weakness on the market due to Covid fears resuming, it is expected that the selling will resume in the counter.

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Craftsman Automation Positives:

(a)    Diversified engineering company with a focus on providing comprehensive solutions and manufacturing high quality, intricate and critical products, components and parts

(b)   Long term and well established relationships with marquee domestic and global OEMs

(c)    Experienced promoters and management team with strong domain expertise

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Avinash Gorakshakar, Director Research at ProfitMart Securities says that Craftsman Automation business can be categorized in three segments:

1) Powertrain and other products for the automotive segment

2) Aluminum products for the automotive segment

3) Industrial and engineering products segment.

The Power Train & Industrial segment contributes over 80% of Revenue and EBITDA margins are over 20% in these segments while the Aluminium product segment contributes 20% and it is a loss making venture. He believes that the fundamentals of Craftsman Automation are weak. Over last 3 years company financial performance was not impressive, 20% degrowth in FY20 over FY19, Total Debt to EBITDA stands at 3x, average cost of debt 14% which is very high, ROE 6.5%, Credit rating BBB+ (CRISIL)

The Valuations of Craftsman Automation are expensive. The Issue is coming at PE of 68x and EV/EBITDA of 11x which is expensive compared to most of its peers.

Craftsman Automation Investment concerns:

Craftsman Automation reported poor consolidated top-line (CAGR of ~0.5% over FY2018-20), hence growth concerns remain. Also, the company's more than 70% revenue comes from the Automotive segment (Slowdown in automobile industries could impact the overall sales volume of the company).