Jyoti CNC Automation IPO
Published by Sharekhan Education | January 11, 2024
Jyoti CNC Automation IPO is coming with an issue size of Rs.1000 Cr, Price band of Rs.315-331 Cr. The issue opens on Tuesday, 9th Jan 2024 and closes on Thursday, 11th Jan 2024
Company Overview:
Jyoti CNC Automation Ltd. is a leading manufacturer of metal-cutting computer numerical control (CNC) machines. It has a diverse portfolio of CNC machines with CNC Turning Centers, CNC Turn Mill Centers, CNC Vertical Machining Centers, and CNC Horizontal Machining Centers. The company caters to customers across diverse industries such as aerospace & and defense, auto & and auto components, general engineering, EMS, dies, and molds. It offers solutions suited for transitioning towards ‘Industry 4.0’. The company operates 3 manufacturing facilities -2 in Rajkot and 1 in France. The Economic Times awarded it the Best Metal Cutting Brand for 5 consecutive years over 2018-2022.
Objects of Jyoti CNC Automation IPO:
The IPO is a fresh issue of equity shares aggregating to Rs 1000 crores. The company will use the proceeds from the fresh issue to fund long-term working capital requirements and repay debt. Investors need to apply for a minimum of 45 shares and in multiples thereafter. After allotment, both BSE and NSE will list the shares. Listing of the equity shares will result in the enhancement of the brand name.
Industry Overview:
By 2027, experts estimate that the global CNC machining center market will reach around $51.5 billion. It is expected to experience a CAGR of 10.3% over the period 2023-2027. Major drivers of this market include global automotive and heavy industry manufacturers, who are actively embracing automation and advanced software solutions to meet the needs of their customers.
In addition, the shortage of skilled labor, working hour limits, and labor costs are on the rise. Thus, there is a rapid growth in the demand for automated precision machines.
Competitive Strengths:
The company has vertically integrated operations which enables customization and production efficiencies. It has a well-diversified global customer base spread across end-user industries. Their product portfolio comprises entry-level products to sophisticated machines, including high-speed simultaneous 5-axis, multi-purpose, and multi-tasking machines. It can deliver innovative solutions bolstered by dedicated R&D facilities. Their manufacturing facilities in India are ISO-certified.
Business Strategy:
The company plans to increase market share in current end-use industries, diversifying its customer base, particularly focusing on the EMS industry. It plans to offer customized solutions meeting diverse industry needs while tapping into the rising demand for domestic CNC production driven by government initiatives like ‘Make in India’. It aims to deepen its presence in the aerospace and defense sectors. With India’s ‘Aatma Nirbhar Bharat’ initiative bolstering domestic spending on defense, the company foresees opportunities in this sector, aiming to align with the substantial growth in Indian defense exports and the resultant surge in demand for high-end CNC machines.
Key Concerns:
The company is completely reliant on third-party logistics service providers for the transport of input materials and finished products. It generally does not have long-term purchase contracts with its customers. It has incurred significant indebtedness. In the past, it has rescheduled payments on its credit facilities and experienced delays in repaying both principal amounts and interest on loans.
Financials:
The company has delivered revenue growth of 26.5% CAGR over FY21-23. EBITDA has grown at 75.2% CAGR over the same period. EBITDA margins have expanded from 5.5% to 10.5%. The company has turned profitable at the bottom-line level in FY23. Debt to Equity has increased from 5.9 to 10.2. The order book is fairly diversified with more than 55% in defense, 12% in auto components, and 9.2% in upcoming EMS segments. At the upper end of the price band (₹315-331) the issue seems richly valued at a P/E of 500x on post-issue FY23 earnings.
Source: IPO Red Herring Prospectus
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