Craftsman Automation IPO: 10 things to know before investing in the issue

The public issue of Craftsman Automation will open for bidding for public on March 15 and close on March 17.

2) Price Band

The price band for the offer has been fixed at Rs 1,488 to Rs 1,490 per equity share.

3) Public Issue

The initial public offering comprises a fresh issue of Rs 150 crore by the company and an offer for sale of 45,21,450 equity shares by the promoter and investors.

Promoter Srinivasan Ravi is going to offload 1,30,640 equity shares through the offer for sale. Among investors, 15,59,260 equity shares will be offered by Marina III (Singapore) PTE, 14,14,050 by International Finance Corporation (IFC) and 14,17,500 by K Gomatheswaran.

The minimum bid lot is of 10 equity shares and in multiples thereof. The minimum application size will be Rs 14,900 at the higher price band.

Half of the issue is reserved for qualified institutional buyers, 15 percent for non-institutional investors and the remaining 35 percent for retail investors. All bidders, other than anchor investors, are required to participate only through an application supported by a blocked amount (ASBA) process.

The company is going to raise Rs 823.69 crore through the issue, of which Rs 247 crore was raised from anchor investors on March 12.

4) Objects of the issue

The company will utilise fresh issue proceeds for repaying certain borrowings to the extent of Rs 120 crore, while the funds from the offer for sale will go to the selling shareholders— the promoter and investors.

Also read: Laxmi Organic Industries IPO: 10 key things to know before subscribing to the issue

5) Company profile

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, aluminium products for the automotive segment and industrial and engineering products segment. It is the largest player 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.

The end-users for its products include original equipment manufacturers (OEMs) producing commercial vehicles, special utility vehicles, tractors and off-highway vehicles. Additionally, it also provides machining services within automotive powertrain and others segment.

Its key products are highly engineered and include crankcase and cylinder blocks for two-wheelers, engine and structural parts for passenger vehicles and gearbox housing for heavy-commercial vehicles.

Sales volume, in terms of tonnage, from the automotive-aluminium products segment was 9,339.32 tonnes, 12,596.22 tonnes, 18,863.83 tonnes and 11,819.04 tonnes for the nine months ended December 2020, FY20, FY19 and FY18, respectively.

The company commenced operations in 1986 in Coimbatore, Tamil Nadu. It owns and operates 12 manufacturing facilities in seven cities in India, with a total built-up area of over 1.5 million square feet.

6) Clients

Craftsman has a long-term relationship with several marquee domestic and global OEMs and component manufacturers across three business segments.

It has a diversified client base with top 10 customers accounting for 59.15 percent, 53.41 percent, 56.25 percent and 52.59 percent of revenue from operations, in the nine months ended December 2020 and FY20, FY19 and FY18, respectively.

7) Strengths and strategies

Strengths

a) It is a diversified engineering company with a focus on providing comprehensive solutions and manufacturing high quality, intricate and critical products, components and parts.

b) It has strong in-house process and product-design capabilities with the ability to interchange capacity and product mix.

c) The company has a long-term relationship with marquee domestic and global OEMs.

d) It has an extensive manufacturing footprint.

e) It has an experienced management team supported by a motivated and skilled workforce.

Strategies

a) The company intends to leverage vertically integrated manufacturing and engineering capabilities to tap the growing opportunities for aluminium usage in the automotive–aluminium products and industrial and engineering segments.

b) It intends to increase wallet share and acquire new business by leveraging existing OEM relationships and adding new customers.

c) It seeks to pursue emerging opportunities, including storage solutions and material handling, which are growing market opportunities.

d) It intends to continue enhancing operational efficiencies, increase economies of scale, better absorb fixed costs, reduce other operating costs and strengthen its competitive position.

8) Financials

Craftsman Automation registered a revenue growth at a CAGR of 0.5 percent during FY18-FY20 and profit grew at a CAGR of 14.1 percent, ICICI Direct said, adding the company's EBITDA rose at a CAGR of 16.4 percent during the period.

The share of its three business segments within revenue from operations has remained relatively stable during this period, with the automotive–powertrain and others, automotive–aluminium products and industrial and engineering segments accounting for 51.21 percent, 21.10 percent and 27.69 percent, respectively of revenue from operations in the nine months ended December 2020, and 47.52 percent, 17.27 percent and 35.21 percent respectively of revenue from operations in FY20.

Its peers include Bharat Forge, Jamna Auto Industries, Mahindra CIE Automotive, Minda Industries and Ramkrishna Forgings.

9) Promoters, investors shareholding and management

Promoter Srinivasan Ravi is the chairman and managing director of the company. He is a mechanical engineer by training and a first-generation entrepreneur with over 34 years of industry experience. He holds 52.83 percent of the paid-up equity of the company, while the total shareholding of promoter and promoter group is 63.40 percent.

The company had received funding from global investors, International Finance Corporation in 2010 and 2012, and Standard Chartered Private Equity (Mauritius) II in 2012 (which transferred its stake to its affiliate, Marina III Singapore Pte in 2017). IFC and Marina presently have 14.06 percent and 15.50 percent shareholding, respectively, in the company.

Ravi Gauthamram is the whole-time director and Udai Dhawan the nominee director. Chandrashekhar Madhukar Bhide, Sundararaman Kalyanaraman and Vijaya Sampath are independent directors on the board.

CB Chandrasekar is the Chief Financial Officer of the company. He has more than three decades of experience in the fields of finance, secretarial and accounting.

Thiyagaraj Damodharaswamy is the Chief Operating Officer - Automotive, of the company. He joined the company in January 2002 as a quality system engineer.

10) Allotment, refund and listing dates

After closing the public issue on March 17, the company, in consultation with merchant bankers, will finalise share allotment on March 22 and will initiate refunds for anchor investors, if any, and unblock funds from ASBA account around March 23, says the prospectus.

Allotted shares will get credited to demat accounts of eligible investors around March 24 and trading will commence from March 25.