Tag: automobile industry

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The Story Of Zoomcar

zoom car story

Zoomcar is a word synonymous with road trips and getaways. Before the COVID-19 menace started in 2020, many of us would take a much-needed escape from routine. Munnar, Nandi Hills, Lovanala, Shimla. Oh, the nostalgia! Oftentimes, for many of the young Indians who didn’t own a car, Zoomcar came to the rescue. 

The last one and a half years have been harsh on the car rental industry. As people stayed home and travel restrictions crept in, people stopped renting cars and the industry was left paralyzed for quite some time. 

In this piece, we explore how the Idea of Zoomcar came about, its business model, and what the company plans to do in the future while navigating out of the pandemic-struck market at the same time.

The Inception

Zoomcar was founded by American duo Greg Maron and David Back, who met while they were pursuing a business degree at USC Marshall School of Business. 

Greg used to work in finance at a company that had its operations in India. As an analyst, Greg did have some idea about the Indian market. He felt that there was a void in the Indian car rental space. In 2013, the two friends ventured out to the city of Bangalore in India, and with the help of some Indian friends, started Zoomcar.

The provisions for rented self-drive car companies in India were introduced almost TWO DECADES before Zoomcar took off in India. The Rent A Cab Scheme, 1989, was launched by the Government of India. According to the rules, the licensee company needs to have at least 5 offices and 50 cars to get a license for the state. Apart from this, there were some unusual requirements. The unusual requirements and rules could have been the reason that self-drive companies did not succeed for almost two decades. This was until Zoomcar came and cracked the scheme. Since the startup did not have the right funds to buy offices and cars, it approached local vendors with a taxi fleet and onboarded them on their platform. This way, they were not only able to get the licenses but also quickly expand their market.  

The Indian car rental space is fuelled by its growing young population. An average young Indian doesn’t want to own a car because it is too much of a hassle to maintain them. Also, many would use their car infrequently. Some couldn’t afford it, while many thought that the money could be used elsewhere. After all, it would be convenient and cheap to share a cab or a ride to work. 

Now, what if the average young Indian wants to go on a road trip or a vacation? Without a car rental space, the only other way would be to borrow a car from a friend or a less trustworthy car dealer. Zoomcar founders Greg and David caught the smell of it in 2012, and the rest is history.

How Zoomcar Makes Money

Headquartered in Bangalore, owned by parent company Zoomcar Inc in the US, with a fleet of more than 10,000 cars in 50+ cities, Zoomcar is beating the odds having captured close to 75% of the car rental space in India. The global car rental industry was valued at $92.92 billion or Rs 7 lakh crore in 2019. Rising fuel prices and the uncertainty of COVID-19 have made the growth estimates of the industry contentious. 

Zoomcar has managed to raise a funding of close to Rs 1,200 crores. The company is currently valued at more than Rs 1,600 crores. The latest round of funding was in May 2021, where Zoomcar raised Rs 40 crores. The company is backed by close to 36 investors in total. Sequoia Capital, Mahindra & Mahindra, Ford Motor Company, Nokia Growth Partners are some of the big names.

As for revenues, Zoomcar makes money through two segments. Car rentals and Car ‘Sharing’. The company rents cars for days, weeks, and even months. The renting procedure is simple: you pay a rental amount along with a security deposit and get going for your trip.  Zoomcar’s subscription-based model was a huge hit where one could pay anywhere between Rs 10,000/month and Rs 40,000/month based on requirements like sharing, model, frequency of use, etc

Zoomcar has also tied up with automobile manufacturers like Tata, Mahindra, and Ford that lease their cars to Zoomcar for a definite period. Mahindra’s REVA E20 electric vehicle became the first EV to get listed on a car rental platform in India. Apart from this, Zoomcar leases cars from other leasing companies and onboard local operators to meet requirements at the same time. 

Coming to the Zoomcar Associate Program or ZAP. Simply speaking, if you own a car and do not intend to use it frequently, you can choose to list it on the Zoomcar platform where other users can rent it. The ownership remains with you while you earn a passive income when not using the car. Zoomcar tears a commission off it while guaranteeing to pay you a minimum revenue every month. You can check out the detailed ZAP policy here.

The Future

The car rental industry wasn’t regulated much before the entry of Zoomcar. The idea that you could rent a car whenever you wanted instead of spending money on buying and maintaining it was appealing. Zoomcar has the first-mover advantage in the rental space. 

In a recent interview, CEO and Founder Greg Maron hinted that the company is planning to list on the US markets. The financial condition of the company isn’t pretty impressive. The bottom line remains, Zoomcar isn’t profitable yet. The company’s loss doubled from Rs 202 crore in FY2019 to Rs 424 crore in FY2020. The company has managed to get a valuation of $170 million, far from $1 billion when it would be called a Unicorn. The company is eyeing foreign markets like the Middle East and Southeast Asian countries. An IPO in the US markets could be a turning point for the company where it could spearhead operations not only in India but globally as well. 

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Vehicle Scrappage Policy: All You Need To Know

Prime Minister Narendra Modi announced the Vehicle Scrappage Policy or National Automobile Scrappage Policy at the Investor Summit at Gujarat in August 2021. There are plenty of old vehicles in the country, which is not only a safety hazard but also contribute to pollution. The policy aims to discard old vehicles that are not fit to operate on roads. At the same time, it encourages consumers to buy new vehicles, giving a boost to the automobile industry. 

What Is The Vehicle Scrappage Policy?

Fitness Testing 

Private vehicles older than 20 years and commercial vehicles older than 15 years will have to undergo a fitness test at government-registered ‘Automated Fitness Centres’. In the fitness test, various systems of the vehicle will be tested. If the vehicle passes the test, the owner can re-register the vehicle with a hefty fee. If the vehicle fails the fitness test, it will be deemed as End Of Life Vehicle (ELV) and will be scrapped at an Authorised Vehicle Scrapping Facility (AVSF). The entire initiative will be set up under a Public-Private Partnership (PPP) Model.

The Union Road and Transport Ministry has issued rules for scrapping facilities, their registration, their powers, and scrapping methods to be followed.

Incentives and Disincentives

  • If an owner chooses to scrap the vehicle, they will be given a scrappage value of 4-6% of the ex-showroom price of the vehicle. 
  • A rebate of up to 25% for Passenger Vehicles and 15% on Commercial Vehicles will be given in Road Tax. 
  • A discount of 5% will be given on a new vehicle’s ex-showroom price by the auto-manufacturer. 
  • No registration fees for the new vehicle will be charged. 

What Is The Significance Of The Vehicle Scrappage Policy?

With this policy, the government aims to: 

  • Incentivize scrapping old vehicles and buying new ones. 
  • Ensure that the vehicles plying on road are safe to use, thereby reducing road accidents. 
  • Increase its revenue by charging people who wish to use old vehicles. 
  • Scrapping old metals and spares provides cheap raw materials, which means auto-manufacturers can reduce the cost of production. 
  • Reduce pollution caused by old vehicles.

Vehicles that are not fit to ply on roads are a safety hazard and a leading cause of pollution. India has plenty of such old vehicles. According to a speech made by Transport Minister Nitin Gadkari in Parliament, there are close to 51 lakh Light Motor Vehicles (LMVs) that are above 20 years old and 34 lakh LMVs more than 15 years old. This policy is expected to garner Rs 10,000 crore in investments and create up to 35,000 jobs in the sector, creating a ‘circular economy’. 

Recycling such cars will help reduce the import of Aluminium, Copper, Steel, Iron, and more. This will even boost demand as unfit vehicles will be replaced with better, newer vehicles. This could eventually drive demand for electric vehicles (EVs) as recycled spares could even be used over there too.  

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Sona Comstar IPO: All You Need to Know

sona camstar

The IPO frenzy has returned to the Indian stock markets. Sona BLW Precision Forgings, one of the leading auto components manufacturers in the world, had launched its three-day initial public offering (IPO) on June 14. In this article, we take a closer look into the company and its IPO.

Company Profile – Sona BLW Precision Forgings

Sona BLW Precision Forgings Ltd (SBPFL) is an automotive technology company headquartered in Gurugram, Haryana. It was incorporated in 1995. The company is widely known as Sona Comstar. It is primarily engaged in the design, manufacturing, and supply of mission-critical automotive systems and components in India and around the globe. Their products include differential assemblies, gears, conventional and micro-hybrid starter motors, etc. The company also manufactures a range of electric vehicle (EV) traction motors. Hence, they provide essential components required for the production of all types of vehicles.

Last year, Sona Comstar secured its position as one of the top 10 global players in the differential bevel gear segment. It is also the largest exporter of starter motors in India. According to a recent report by Ricardo plc (a consultancy firm), Sona Comstar obtained a global market share of 5% for differential bevel gears and 3% for starter motors in 2020. They also secured an impressive global market share of 8.7% for BEV differential assemblies (used in EVs). 

The company caters to the rising demands of some of the largest manufacturers of passenger vehicles (PV), commercial vehicles (CV), and tractors in the world. Their client list includes Ashok Leyland, Volvo, Mahindra & Mahindra, Maruti Suzuki, Daimler, and Renault Nissan.

SBPFL supplies its products across India, Europe, China, and the United States. Close to 95% of its total revenue comes from sales in overseas markets. They own and operate 9 manufacturing and assembly units across India, China, the US, and Mexico. Sona Comstar is also well known for its extensive Research & Development (R&D) activities. The company is run by a set of highly experienced managers and promoters, led by Sunjay Kapur. He has over 21 years of experience in the auto industry. They are backed by US-based investment firm Blackstone Group.

About the IPO

In May 2021, Sona BLW Precision Forgings received approval from SEBI to float an initial public offering (IPO). The public issue will open on June 14, 2021, and close on June 16, 2021. The total issue size of the IPO is Rs 5,550 crore. This comprises a fresh issue of equity shares aggregating up to Rs 300 crore. It also includes an offer for sale (OFS) of up to Rs 5,250 crore by an existing shareholder— Singapore VII Topco III Pte. Ltd. The company will issue a total of ~19.07 crore shares. The price band for the IPO has been fixed at Rs 285-291 per share.

Individual investors can bid for a minimum of 51 equity shares (1 lot), which will amount to Rs 14,941. The maximum number of shares that can be applied by a retail investor is 663 equity shares (or 13 lots). Thus, the maximum amount one can invest in the IPO is Rs 1,92,933. But take care not to apply for more than 1 lot, as your capital may get blocked for no reason if the IPO is oversubscribed.

Sona Comstar will utilise the net proceeds from the IPO for two main purposes. The main priority is to make repayment or pre-payment of its existing debts. The company will spend Rs 241.12 crore from the IPO proceeds to reduce debt. The remaining amount will be used for general corporate purposes. The total promoter holding in the firm will reduce from 100% to 67.30% post the successful completion of the IPO.

Financial Performance

From the table, it is clear that Sona Comstar has posted strong financial growth over the past few years. Its total income has grown at a CAGR of 22.9% between FY18-FY21. In FY20, the company secured the highest operating EBITDA margin, profit margin, Return on Capital Employed (ROCE), and Return on Equity (ROE) when compared to the top 10 publicly listed auto component manufacturers in India.

The net profit for the financial year 2020-21 (FY21) declined by 40.2% YoY to Rs 215.17 crore. This was mainly due to higher provisioning for depreciation and an increase in the cost of raw materials amidst the Covid-19 pandemic. Earnings Per Share (EPS) came down to Rs 3.76 in FY21, compared to Rs 7.06 in FY20. However, the company’s total income increased by 50% YoY to Rs 1,565.64 in FY21. As mentioned earlier, a majority of its revenues come from large automakers from around the globe. The high demand for their innovative products (especially those for electric vehicles) has been a key factor for revenue growth. 

The company’s ROCE stands at 35%, which is very high when compared to its competitors. This means that for every Rs 100 worth of capital employed, Sona Comstar earns Rs 35 on it. The Return on Net Worth (RoNW) stood at 30.6% in FY20 and declined to 16.5% in FY21. RoNW shows how much profit a company generates from the investments made by equity shareholders. 

Risk Factors

  • The company’s business is highly dependent on the performance of the automotive sector globally. Any drastic changes in conditions affecting its key markets (US, Europe, India, and China) could adversely impact their overall operations and financial performance.
  • The revenue derived from Sona Comstar’s top 10 customers represents around 79.9% of its overall sales income (as of December 31, 2020). The loss of any one of these customers or even a reduction in purchases by them will negatively affect financial results.
  • Like most other companies, the Covid-19 pandemic caused a severe impact on Sona Comstar’s operations. All manufacturing and assembly facilities were shut worldwide due to strict lockdowns. The company had also experienced a sharp decline in overall demand for its products. Such health threats could adversely affect its business/financial growth.
  • Sona Comstar has admitted that it may not be successful in implementing its growth strategies, including the strategy to capture opportunities in the highly promising electric vehicle (EV) market. Their R&D segment could fail to develop new and improved products on time or may exceed estimated budgets.
  • The company faces a very high level of competition in both the domestic and international markets. When compared to peers, it may not be able to launch new products based on rapidly-changing customer demands or requirements.  

IPO Details in a Nutshell

The finalisation of the basis of allotment is likely by June 21. Kotak Mahindra Capital, Credit Suisse Securities, JP Morgan India, JM Financial, and Nomura Financial Advisory & Securities have been appointed as the book-running lead managers to the public issue. Sona BLW Precision Forgings had filed draft papers for its IPO in February 2021. You can read it here.

Ahead of the IPO, Sona Comstar raised Rs 2,497.5 crore from anchor investors on June 11. The investors include the Government of Singapore Investment Corp (GIC), Nomura Asset Management, Morgan Stanley, RWC Funds, Goldman Sachs Asset Management, etc. 

Conclusion

The global auto components industry is growing at a fast pace. According to a report from Automobile Component Manufacturers Association (ACMA), the Indian auto components industry is expected to grow to a $200 billion (~Rs 14.50 lakh crore) market by 2026. Sona BLW Precision Forgings has transformed into one of the best-performing and innovative companies in this industry. Even though most of the firms in the auto sector suffered from the Covid-19 pandemic, SBPFL was able to post higher revenues. It has changed its focus towards delivering green technologies and launching components suitable for the future of mobility— EVs. This indicates that one could invest in the company based on its future growth prospects.

Sona Comstar will be directly competing with major players such as Motherson Sumi Systems, Sundaram Clayton, Bosch Ltd, Mahindra CIE, Sundaram Fasteners, and many more.

Before applying for Sona Comstar’s IPO, I will personally wait to see if the portion reserved for institutional investors gets oversubscribed. Due to its impressive track record, the company is expected to attract significant investor participation. As always, do consider the risks associated with this company and come to your own conclusion.

What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.

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The Global Semiconductor Shortage: Explained

Over the past year, manufacturers of personal computers (PCs), smartphones, and automobiles have been facing a major shortage of a vital component— semiconductors. The supply of chips, which is the “brain” within every electronic device, has been declining steadily since 2020. Prominent companies such as Apple, Samsung, Ford, Sony, and many others have been forced to delay the supply of their latest products. Let us take a closer look into the reasons behind this shortage. 

What are Semiconductors?

Semiconductors are essentially materials like silicon that can conduct electricity. These materials are in the form of chips and are an integral part of almost all electronic devices in the world today. In the automobile industry, features such as power steering, brake sensors, and parking cameras are all dependent on these chips. According to a report from Deloitte, a petrol or diesel car has an average of 1,300 chips, while an electric vehicle requires over 3,500 chips. Moreover, chips available today have exceptional processing power and are in high demand in our tech-savvy world. 

What Led to the Semiconductor Shortage?

The Covid-19 Pandemic and Lockdowns

  • The global lockdowns imposed due to the Covid-19 pandemic led to a huge spike in the demand for electronic devices. Most of us turned to our smartphones, laptops, TVs, or gaming systems to pass the time. Thus, chipmakers primarily focused on supplying the manufacturers of such devices. At the same time, automobile companies had to shut down their production units. As lockdown restrictions were eased gradually, automakers began to resume production. Unfortunately, at that point, there were not enough chips available for global auto players.
  • At the beginning of the pandemic, global automakers cut down their sales forecasts as they assumed that demand for new cars would drop. With the removal of lockdowns, there was a substantial and sudden increase in demand for passenger cars (as people did not want to use public transport). Since the auto industry did not anticipate this pent-up demand, they did not hold an adequate inventory of chips for cars. They are still not able to ramp-up the production of vehicles, which is causing a major hit on their profits.
  • With people confined to their homes, there was a need for video conferencing platforms to conduct meetings or classes. Enterprises such as Zoom and Microsoft had to invest heavily in their cloud services to boost their data centers (servers). Fast-processing chipsets are required for PCs or laptops to ensure better audio and video quality.

Demand-Supply Issues

  • Last year, we could see that chipmakers had actually been pumping out more Central Processing Units (CPUs) and Graphics Processing Units (GPUs) than ever before. And, people all over the world had actually been buying more devices for their daily use. Many had blamed cryptocurrency miners for a shortage of GPUs. [Mining for cryptos such as Bitcoin requires very high processing power]. However, several reports mention that these GPUs were actually bought by gamers.
  • Graphics card-makers Nvidia and AMD have to guess how many GPUs they will sell months or even a year in advance. This is based on historical data or trends in the gaming industry. However, the numbers that they had guessed in 2020 were way off. Ultimately, the demand for their products was much greater than the supply.
  • There are only two major companies in the world that can manufacture the latest high-processing chips— Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Foundries. In normal circumstances, both firms would be manufacturing at roughly 80-90% of their capacity to make enough semiconductors to stay profitable. If Nvidia and AMD have a higher demand for GPUs, they would buy out the remaining 10-20% of TSMC’s ‘idle time’ and make more chips.
  • In the current scenario, chip fabrication systems are already running at 100% capacity. This means that Nvidia, AMD, Apple, or any other company would only get chips based on exactly what they pre-booked, and nothing more.

When Will This Issue Be Resolved?

A multi-layered approach has been initiated to address the effects of the global chip shortage. In February, US President Joe Biden signed an executive order that seeks to eliminate the semiconductor shortage, which has impacted industries ranging from medical supplies to electric vehicles (EVs). He called for $37 billion in federal funding for the same. On the other hand, chipmakers have announced plans to increase their production capacity to meet the rising demand. TSMC stated that it would establish a $35 billion production facility in Arizona. Samsung Foundry will also build a $17 billion chip fabrication facility in the US by late 2023. 

As we can see, tens of billions of dollars are required to ramp up production. The units being established by prominent chipmakers will take two years to complete. Unfortunately, the problem will not be resolved even after setting up these factories. The chips are incredibly complex and can take up to 26 weeks to produce. Moreover, every part of the supply chain (including testing, assembling, packaging, logistics) needs to be upgraded. This means that these shortages will continue for a long time. As per reports from MarketWatch, the worldwide chip shortage is expected to last well into the next year. This is clearly bad news for the automobile, smartphone, and PC/GPU manufacturers. Prices of their products would definitely go up further. 

Let us look forward to seeing how the automotive and electronics industry tackles this pressing issue. 

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Craftsman Automation IPO: All You Need to Know

Craftsman Automation has launched its three-day initial public offering (IPO) today- March 15, 2021. This is the first IPO to be launched by an auto components manufacturer in the past 3 years. Let us take a closer look into the company and its IPO.

Company Profile – Craftsman Automation

Craftsman Automation Limited is an engineering company based in Coimbatore. It was incorporated in 1986 and is primarily engaged in the design, development, and manufacturing of automotive components. The company is well-known for the machining of cylinder blocks and cylinder heads in commercial vehicles and tractors. A cylinder block is the basic framework of a vehicle’s engine that plays an important role in maintaining stability and controlling temperature. The company offers a wide range of such components to automobile manufacturers in India and abroad. 

The company’s products and services segments are divided into three verticals:

  1. Automotive- Powertrain and others: This includes engine parts such as cylinder heads, cylinder blocks, transmission parts, turbocharges, etc. These components are used in the production of commercial vehicles, special utility vehicles, and tractors. This segment contributes nearly 17.3% to the overall revenue of the company.
  2. Automotive- Aluminium products: This segment includes key products such as cylinder blocks, as well as crankcases for two-wheelers, passenger vehicles, and commercial vehicles. This division contributes 47.5% to the company’s overall revenue.
  3. Industrial and Engineering: The main products in this segment include high-end precision products (castings) and storage solutions. It caters to the pharma, fast-moving consumer goods (FMCG), and e-commerce industry. This segment contributes 35.2% to the total revenue. 

Craftsman Automation owns and operates 12 state-of-the-art manufacturing facilities across 7 cities in India. These units are strategically located near major automobile manufacturing hubs. The company has established itself as a leading provider of essential components to large automakers. Some of their prominent clients include Mahindra & Mahindra, Tata Motors, Escorts, Ashok Leyland, Daimler India, JCB India, and TVS Motors. 90% of their revenue comes from the domestic market and the remaining 10% from exports.

About the IPO

In February 2021, Craftsman Automation received approval from SEBI to float an initial public offering (IPO). The public issue will open on March 15, 2021, and close on March 17, 2021. The total issue size of the IPO is Rs 823.70 crore. This comprises a fresh issue of equity shares aggregating up to Rs 150 crore. It also includes an offer for sale (OFS) of 45.21 lakh equity shares (aggregating up to Rs 673.70 crore) by promoters and existing shareholders. The price band for the IPO has been fixed at Rs 1,488-1,490 per share.

Individual investors can bid for a minimum of 10 equity shares (1 lot), which will amount to Rs 14,900. The maximum number of shares that can be applied by a retail investor is 130 equity shares (or 13 lots). Thus, the maximum amount one can invest in the IPO is Rs 1,93,700. But take care not to apply for more than 1 lot, as your capital may get blocked for no reason if the IPO is oversubscribed.

Craftsman Automation will utilise the net proceeds from the IPO for two main purposes. The main priority is to make repayment or pre-payment of its existing debts. As per reports, around 80% of the IPO proceeds will be used for repaying debts. The remaining amount will be used for general corporate purposes. The company’s promoters, lead by Srinivasan Ravi, currently hold a 63.4% stake. The total promoter holding in Craftsman Automation will reduce to 59.76% post the successful completion of the IPO.

Financial Overview

.31 Dec 2020(FY 21)31 March 2020 (FY20)31 March 2019 (FY19)31 March 2018 (FY18)
Total Assets2,246.292,303.132,325.391,999.4
Total Income1,029.91,501.051,831.61,522.86
Profit After Tax50.641.0797.3631.5
(Values in Rs crore)

From the table, it is clear that Craftsman Automation’s financial performance has not been consistent over the years. The company’s revenue grew at a CAGR of ~20% between 2017 and 2019. After this period, it faced a decline in both domestic and international demand across all three product verticals (due to a slowdown in the automobile industry). The Industrial & Engineering division is the only segment that has shown positive growth in the last three years. The fall in revenue was also due to the high capital expenditure it incurred for setting up production plants. On the other hand, it shows how they have focused on scaling up production activities.

The company’s profit has shown a strong rebound at Rs 50.6 crore for the 9 months ended December 2020, despite a heavy fall in revenue. This was primarily because their interest costs (for loans) had fallen due to the moratorium introduced by the government amidst the Covid-19 pandemic. 

Another factor to consider is the overall debt burden of the company. Between 2016 and 2020, Craftsman Automation’s long-term debt has grown at a CAGR of around 20%. This is quite alarming indeed. Its total debt as of December 31, 2021, stood at Rs 890.11 crore. As mentioned before, the company will use a major part of its IPO proceeds to reduce this debt. 

Graph showing the company’s long-term debt figures from 2017-2020 (Values in Rs crore)

Risk Factors

  • There has been a significant decline in automobile sales due to the ongoing Covid-19 pandemic. The company is uncertain whether its sales will recover even after the impact of the Covid-19 pandemic is over.
  • Craftsman Automation has not been able to meet debt obligations through its debt financing arrangements. Also, some of the company’s assets have been mortgaged as securities with lenders. In case they are unable to pay off debts, it may adversely affect their business operations, financial results, and cash flows.
  • As mentioned before, the company has prominent clients from the automobile industry. There could be instances wherein the firm loses key customers, which could lead to a decline in production and sales. This could affect its overall business operations and financial results.
  • The company operates in a highly competitive business environment. Its market share and profits could decline if they are unable to respond to competition and pricing pressures. This could ultimately affect their operations and financial results. [Craftsman Automations’ peers in the auto-components industry include Bharat Forge, Endurance Technologies, Mahindra CIE Automotive, and Sundaram Fasteners]  
  • Craftsman Automation is also involved in certain legal proceedings amounting to Rs 21.24 crore.
  • The company does not have long-term contracts or exclusive arrangements with its suppliers. Its operations could be severely affected by supply chain disruptions, which has been a major issue for many firms amidst the Covid-19 pandemic.

IPO Details in a Nutshell

IPO DateMarch 15, 2021 – March 17, 2021
Issue TypeBook Built Issue IPO
Face ValueRs 5 per equity share
IPO PriceRs 1,488 to Rs 1,490 per equity share
Lot Size10 shares
Issue SizeRs 823.70 crore
Fresh Issue (goes to the company)10,06,711 equity shares of Rs 5 each (aggregating up to Rs 150 crore)
Offer for Sale (goes to promoters)45,21,450 equity shares of Rs 5 each (aggregating up to Rs 673.70 crore)
Allotment DateMarch 22, 2021
Listing DateMarch 25, 2021
Listing AtBSE, NSE

Axis Capital and IIFL Securities have been appointed as the book-running lead managers to the public issue. Craftsman Automation had filed draft papers for its IPO in December 2020. You can read it here.

Conclusion

Craftsman Automation had filed draft papers for an IPO with SEBI way back in June 2018. It had even received the regulator’s approval for the same. However, the company could not launch the public issue as market conditions were not favourable during that period. Now, the question arises whether investors would show interest in this company amidst a slowdown in the automobile sector. Moreover, there are red flags such as declining revenues and large debts. Do consider the risks associated with this company and come to your own conclusion.

Ahead of the IPO, the company was able to raise Rs 247.11 crore from 21 anchor investors. HSBC Global Investment Funds, Tata Mutual Fund (MF), Aditya Birla Sunlife MF, The Nomura Trust are some of the prominent anchor investors of the firm. 

In the current scenario, almost every IPO is providing some lucky investors with great listing gains. Before applying for Craftsman Automation’s IPO, I will personally wait to see if the portion reserved for institutional investors gets oversubscribed. 

What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section.