Craftsman Automation trades at a 2.72% discount, what should be your listing strategy?

Coimbatore-based auto components maker Craftsman Automation made a tepid listing, falling prey to the weakness in the markets. The stock opened for trading at Rs 1,359 on the National Stock Exchange, compared to the issue price of Rs 1,490, implying a discount of -8.79%. On the BSE, Craftsman Automation opened at Rs 1,350, at a discount of 9.40%.

In noon trades, the share recovered from its opening price but was still below it issue price quoting at Rs 1,449.45 losing -2.72% down by Rs 40.55. It made an intraday high of Rs 1,487.80 and a low of Rs 1,349.20, on the BSE.

“Currently the stock is trading at Rs 1,449 which is below its upper price band (Rs1490). We have given a neutral rating to this IPO due to higher valuations, considering its historical two-year CAGR top-line & bottom-line growth. Further, the company’s return ratios are also low compared to its other peers. We continue to maintain our neutral rating on the stock,” said Amarjeet Maurya, AVP Mid-Caps of Angel Broking.

Incorporated in 1986 & headquartered in Coimbatore, Craftsman Automation is diversified engineering 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.

The company has long-term relationships with the likes of Daimler India, Tata Motors, Tata Cummins, Mahindra & Mahindra, Simpson & Co, TAFE Motors and Tractors, Escorts, Ashok Leyland, Perkins, Mitsubishi Heavy Industries, TVS Motor, Royal Enfield, John Deere and JCB India.

Saurabh Joshi- Research Analyst at Marwadi Shares and Finance believes that investor should hold this stock for the long term to reap the benefits of BS-IV to BS-VI transformation, scrappage policy and electric vehicles introduction.

The Rs 823.7 crore issue was subscribed 3.81 times as the public offer received bids for 1.47 crore shares as compared to 38.69 lakh shares on offer. The category for qualified institutional buyers (QIBs) was subscribed 5.21 times, non-institutional investors 2.84 times and retail individual investors (RIIs) 3.43 times.

The IPO was a mix of an offer for sale (OFS) and a fresh issue of shares. The company will raise Rs 150 crore by issuing 10,06,711 equity share of Rs 5 face value. The offer for sale consists of 45,21,450 equity shares offered by existing shareholders.

Proceeds from the fresh issue will be used to repay some of the company’s borrowings. As of September, the company had total secured borrowings long & short term of Rs 963.48 crore.

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