Craftsman Automation IPO opens on 15 March and closes on 17 March 2021. Craftsman Automation IPO size is about Rs.823 cr, out Of which Rs. 673 cr is OFS and Rs. 150 cr is fresh issue. The offer for sale comprises of up to 4,521,450 Equity Shares comprising up to 130,640 Equity Shares by Srinivasan Ravi (Promoter Selling Shareholder), up to 1,559,260 Equity Shares by Marina III (Singapore) PTE Limited, up to 1,414,050 Equity Shares by International Finance Corporation and up to 1,417,500 Equity Shares by K. Gomatheswaran (Individual Selling Shareholder). The Coimbatore based Craftsman Automation is a manufacturer of precision components. The company designs, develop, and manufactures a range of engineering products.

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Craftsman Automation IPO Details:

Issue opensMon, 15th March, 2021
Issue closesWed, 17th March, 2021
Face Value₹ 5 Per Share
Issue DetailsFresh Issue of Equity Shares upto ₹ 150 Cr
 + Offer for Sale of upto 4,521,450 Equity Shares
Issue Size (₹ Cr)₹ 823 – 824 Cr
Price Band₹ 1,488  – 1,490
Bid Lot10 Shares 
Issue Structure : 
QIB50% of the offer
NIB15% of the offer 
Retail35% of offer ( ~1,934,857 Shares, ₹ 288 Cr)
Application for 1x retail193485
BRLMsAxis Capital, IIFL Securities

Updates & Indicative Time Table:

  • ANCHOR ISSUE: IPO bound Craftsman Automation raised about Rs 229 crore from 35 anchor investors. The Anchor investors include HSBC Global Investment Funds, Nomura Funds Ireland, Tata Trustee Company, Aditya Birla Sunlife Insurance Company, Sundaram Mutual Fund, Bajaj Allianz Life Insurance Company, Nippon Life India Trustee Company.
  • Indicative Timetable
    • Finalization of Basis of Allotment 22-03-2021
    • Refunds/Unblocking ASBA Fund 23-03-2021
    • Credit of equity shares to DP A/c 24-03-2021
    • Trading commences : 25-03-2021

About Craftsman Automation

  • Craftsman commenced their operations in 1986 in Coimbatore.
  • Craftsman Automation, is a diversified engineering company with vertically integrated manufacturing capabilities, engaged in three business segments
    • Powertrain and other products for the automotive segment: key products are highly engineered and include engine parts. Craftsman is the largest player in the machining of cylinder blocks and cylinder heads in the intermediate, medium and heavy commercial vehicles segment as well and also in construction equipment in the country. Craftsman Automation is also among the top 3-4 component players with respect to machining of cylinder block for the tractors.
    • Aluminium products for the automotive segment: carry out processes of high pressure, low pressure and gravity die casting machines to manufacture components, machining tools for machining and assembly lines. It is present across the entire value chain in the Automotive-Aluminium Products segment, providing diverse products and solutions.
  • Craftsman Automation clientele include Tata Motors, Dailmer India, Tata Cummins, Mahindra & Mahindra, Royal Enfield, Siemens, Escorts, Ashok Leyland, VE Commercial Vehicles, TAFE Motors & Tractors, etc.
  • The company owns and operates 12 plants pan India, strategically located close to its customers.
  • Craftsman has been consistently recognized by customers for the high-quality of the products supplied by them.
  • They are certified for international quality management systems such as ISO 9001:2008, ISO/TS 16949:2009, ISO 14001 2004 by TUV Nord, and have implemented environmental management system ISO 14001:2004.
  • Craftsman Automation had a workforce of 259 management staff, 1,372 permanent workmen, 755 apprentices and 1,214 contract workmen. For their Industrial and Engineering segment, which is a customer oriented business, Craftsman has a marketing and business development team, comprising 30 full time employees.
Craftsman Automation ~~

Craftsman Automation IPO: Financials

Particulars / Rs. In Cr.9mFY21Fy20Fy19FY18
Revenue from Operations49.25140.99101.11100.11
Revenue Growth (%)39.44%1.00%
EBITDA as stated43.3651.3244.8112.28
Profit Before Tax41.8447.5241.1810.53
Net Profit 31.1134.6523.990.03
Equity Share Capital21.7321.7321.737.24
Reserves112.480.9946.236.72
Net worth 134.12102.7267.9343.96
RoNW (%) 23.11%32.58%35.32%0.07%
NAV(₹ )12.169.326.2560.72
EPS (₹ ) 2.863.192.70.61
FV2
IPO Price187
FY20 EPS3.19
PE 58.64
Market Cap2032
Market Cap  /  Sales14.4

Pros

  • Craftsman Automation Limited is a diversified engineering company with a focus on providing comprehensive solutions and manufacturing high quality, intricate and critical products and components.
  • It has strong in-house process & product design capabilities with the ability to interchange capacity and product mix
  • Long term and well established relationships with marquee domestic and global OEMs
  • Extensive manufacturing footprint, with strategically located manufacturing facilities
  • Experienced management team and skilled work force.
  • Track record of good financial performance

Cons

  • Competitive business environment
  • The company does not have long term contracts or exclusive arrangements with any of its suppliers.
  • Possible disruption from EVs
  • COVID related disruption

Craftsman Automation IPO: Assessment

  • Craftsman Automation is a play on revival in Intermediate, M&HCV space in auto sector.
  • It FY 20 revenues were subdued due to BS-VI emission norms.
  • The company derived 47.52% of revenues from Automotive- Powertrain and others and 35.21% from the Industrial Engineering and 17.27% from Automotive-Aluminium products.
  • The Automotive- Powertrain division has EBITDA margins of 36% – 38%, followed by 25% – 29% from Industrial Engineering segment while the Automotive Aluminium segment has 14% – 17% margins. Given the mix of these segments overall EBITA margins are better.
  • The company has received funding from reputed global investors, International Finance Corporation (“IFC”) in the year 2010 and again in 2012. It also got funding from Standard Chartered Private Equity (Mauritius) II Ltd in 2012, which then transferred the stake to its affiliate, Marina III Singapore Pte Ltd. IFC and Marina presently have 14.06% and 15.50% shareholding, respectively, in Craftsman Automation.
  • Both these PE investors i.e. PE investors i.e. Marina and IFC are selling their holding at a good profit but are also retained about 50% of their stake.
  • Some peers of Craftsman Automation include likes of Bharat Forge, Endurance Tech, Jamna Auto, Ramkrishna Forgings.
Company FVCMPRevenue (Rs Cr) EBITDA (Rs Cr) EBITDA margin (%) PE
Craftsman Automation514901,4923982746.6
Bharat Forge26168,0551,11514223
Endurance Tech101,4086,9181,1311644.2
Jamna Auto Industries171.41,1291141077.
Ramkrishna Forgings101008.051,11220318‘Loss
  • Powertrain and other allied business of the company are prone to disruption from electric vehicles. M&HCV space in auto sector could be the last to go the electric way.
  • As per CRISIL Report, the market sizing of storage solutions industry is estimated at Rs. 2,200 crore as of FY20. The industry grew at a CAGR of 15 to 16% over FY16 to FY20 and is expected to Rs. 3600 crore in FY24. While storage solutions segment has a small share in Craftsman Automation overall revenues, it is growing fast and accounted for 4.91% of revenues in FY20 as against just 0.52% in FY18.
  • The company has undertaken Rs. 800 cr. capex , part of this capacity installed is not full utilized and thus company can readily cater to any uptick in demand.
  • In all probability, I intend to apply in Craftsman Automation IPO. The Craftsman Automation IPO looks OK despite the demanding IPO price.
  • Even as the IPO looks OK, due to deluge of IPO’s and high valuations, I am likely to watch subscription levels and apply on Day 3 only.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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