Precision components maker Craftsman Automation shares fell 9.4 percent intraday on March 25 in line with weak market conditions and tepid IPO subscription. While some experts advise holding on to the stock for long term, others say it would be better to invest in another peer company.
The stock opened at Rs 1,350 on the BSE, a 9.4 percent discount to issue price of Rs 1,490. It touched an intraday high of Rs 1,487.80 and low of Rs 1,349.20. At the time of writing this copy, it was trading at Rs 1,456.80, down 2.23 percent.
"Given that the stock listed at a discount, the allotted shares can be kept for long term as the company being the one-stop solution provider has derisked its business model by diversifying into various segments. Also company's clientele includes marquee names & company has demonstrated its ability to retain existing customers as well as continuously add new customers," Astha Jain, Senior Research Analyst at Hem Securities told Moneycontrol.
She said it is worth noted that despite incurring significant capital expenditure, the company was among one of the two companies to improve return on capital employed (ROCE) between FY18 and FY20.
She believes that the government's initiatives like implementation of BS-VI norms and usage of non-ferrous materials for light-weighting of vehicles along with upgradation of farm equipment and construction equipment to BS IV from April 2021 will aid growth going forward.
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Craftsman Automation operates its business through three segments - automotive powertrain and others, automotive aluminum castings, and industrial & engineering.
Its key customers are Daimler India, Tata Motors, Tata Cummins, Mahindra & Mahindra, TAFE Motors and Tractors, Escorts, Ashok Leyland, Perkins, Mitsubishi Heavy Industries, John Deere, Royal Enfield, Perkins and Mahindra & Mahindra.
But Prashanth Tapse, AVP Research at Mehta Equities advised selling the stock on listing day.
"Post listing valuations were not so attractive compared to its peers on fundamentals basis with high debt on books and high competition in domestic as well as in global markets resulting in low-profit margins. It is better to exit on listing day and look for better opportunity in peers," he explained.
However, if in any case Craftsman would be available 15-20 percent discount to IPO price, investors can be considered to accumulate and hold for long term.
"We believe Craftsman Automation 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 but on better lower valuations," he reasoned.
Craftsman Automation raised Rs 823.7 crore through public offer comprising fresh issue of Rs 150 crore which will be utilised for repaying debt.
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