Jyoti CNC Automation made a decent stock market debut on Tuesday with its shares listed at Rs 372, a 12 per cent premium over its issue price of Rs 331 per share on the BSE. Post listing, the stock of industrial products moved higher by nearly 22 per cent to Rs 402.30.
At 10:03 AM; it was quoting at Rs 400.80, a 21 per cent premium against its issue price. In comparison, the S&P BSE Sensex was down 0.04 per cent at 73,297.
Jyoti CNC is one of the world’s leading manufacturers of metal cutting computer numerical control (CNC) machines with the third largest market share in India accounting for approximately 10 per cent in FY23.
The company has diverse portfolios of CNC machines including CNC Turning Centers, CNC Turn Mill Centers, CNC Vertical Machining Centers (VMCs) and CNC Horizontal Machining Centers (HMCs) built over 2 decades of presence and strong R&D capabilities to deliver customized solutions to customers across diverse set of industries including aerospace and defence, auto and auto components, general engineering, EMS, dies and moulds, and others.
The company’s customer base includes Indian Space Applications Center – ISRO, BrahMos Aerospace Thiruvananthapuram, Turkish Aerospace, Uniparts India, Tata Advances System, Tata Sikorsky Aerospace, Bharat Forge and others.
The market for global CNC machines is driven by increased embracing of automation and advanced software solutions by key industries such as automotive and heavy industries to meet their customer needs apart from lack of skilled labor at competitive costs which is expected to grow at a CAGR of 10.3 per cent from 2023-2027.
Jyoti CNC intends to be able to capitalize on its expertise in producing CNC machining centers of up to 5 Axis and poised to take advantage of the growth in 4-6 axis machining centers globally and in India. With improved market share, growing industry demand, diversified presence, augmenting capacities at regular intervals and improving financial risk profile by repaying certain debt, strong order book of Rs 3,310 croe to be executed over the span of next few years augurs well for the company, said analysts at Reliance Securities.
The company recently turned profitable in FY23 & H1FY23. In FY23, the company reported an exceptional gain of Rs 30.4 crore, due to waiver of loan. If we exclude these exceptional gains, the company would end up in losses of Rs 15.34 crore. However, there can be certain questions regarding the consistency. Company has net debt of Rs 650 crore. It plans to repay Rs 400 crore using IPO proceeds.
The company faces key delivery and execution risk. The company procures about 30 per cent of its components, mainly electronic works, from companies like Siemens, Mitsubishi, Fanuc etc. The company’s exports have been reducing over time. The subsidiaries have incurred losses for the period ended September 2023 and FY21, 22, 23, Sushil Financial Services said in its IPO note.
Boasting a robust customer base of over 3,500 across India and Asia, the company has carved a niche with its diverse product range and tailored solutions. However, financial hiccups, including past losses and a negative return on equity, cast a shadow on Jyoti CNC’s otherwise attractive profile. The hefty P/E ratio of 324.5x, significantly higher than the industry average of 50x, further amplifies the risk factor, said Shivani Nyati, Head of Wealth, Swastika Investmart Ltd.
First Published: Jan 16 2024 | 10:17 AM IST