Jyoti CNC Automation IPO entails to raise Rs 1,000.00 crores. The issue is entirely a fresh issue of 3.02 crore shares. Jyoti CNC makes metal cutting CNC machines which are used extensively in automotive, heavy engineering, aerospace and defence industries.

About Jyoti CNC Automation Limited:

• Rajkot based Jyoti CNC Automation Ltd is among the largest one-stop solution providers for computerized machine cutting tools.
• Jyoti CNC Automation Limited 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 approximately 10% of the market share in India in Fiscal 2023 and twelfth largest market share globally accounting for 0.4% of the market share globally in calendar year 2022.
• They are a prominent manufacturer of simultaneous 5-Axis CNC machines in India and is a leader in a wide range of CNC Turning Center, CNC Machining Center (3-4-5 Axes), CNC Horizontal Machining Center, Vertical Line CNC Machines, VTLs etc.
• Huron, a 150-year old machine tool giant in 5-axes machining technology is a subsidiary of the company.
• Parakramsinh Ghanshyamsinh Jadeja, Sahdevsinh Lalubha Jadeja, Vikramsinh Raghuvirsinh Rana, and Jyoti International LLP are the Promoters of Company.

Jyoti CNC Automation IPO: Financials

Anchor: Jyoti CNC Automation IPO

Jyoti CNC Automation Ltd. has raised Rs 447.7 crore from 37 anchor investors ahead of its initial public offering on Jan. 9. Anchor investors included Goldman Sachs, Nomura Funds, Natixis International Funds, Neuberger Berman Emerging Markets Equity Fund, Optimix Wholesale Global, The Master Trust Bank of Japan, Prudential Hong Kong, Carmignac Portfolio, Allianz Global Investors Fund, Eastspring Investments India Fund etc. Also it included investors such as Nippon Life India Trustee, Goldman Sachs Funds, ICICI Prudential Midcap Fund and Kotak Mahindra Trustee, among others. Out of the total allocation of 1,35,27,190 Equity Shares to the Anchor Investors, 52,90,650 Equity Shares (i.e., 39.11% of the total allocation to Anchor Investors) were allocated to 9 domestic mutual funds, which have applied through a total of 21 schemes.

Jyoti CNC Automation IPO: Salient Points

• In the fiscal year 2023, Jyoti CNC Automation achieved profitability, reporting a profit of ₹15.06 crore compared to a loss of ₹48.3 crore the previous year.
• From the net proceeds being entirely fresh issue, there will be debt repayment of Rs. 475 cr. The total debt is Rs. 977 cr. Remaining for working capital – Rs. 360 cr.
• Only 10% IPO portion for retail, as there was loss in FY21 as well as FY22.
• Among its Foreign Subsidiaries, Huron Graffenstaden SAS is located at Strasbourg, France and is a pioneer for 5-Axis machining technology. Further to that company has subsidiaries at Gerlingen, Germany and Quebec, Canada. Huron pre dominantly caters Aerospace, Automotive, Die-mould, General Engineering segments across the globe.
• They currently supply computer numerical control (CNC) machines for customers who operate in diverse sectors such as automobile, general engineering, defence, aerospace, electronic manufacturing services (EMS) and dies & moulds.
• Their customers include Space Applications Centre – ISRO, BrahMos Aerospace Thiruvananthapuram, Turkish Aerospace, Uniparts India Limited, AVTEC Limited, Tata Advanced System Limited, Tata Sikorsky Aerospace Limited, Bharat Forge Limited, C.R.I. Pumps Private Limited, Kalyani Technoforge Limited, Shakti Pumps (India) Limited, Shreeram Aerospace & Defence LLP, Rolex Rings Limited, Orbit Bearings India Private Limited, Omnitech Engineering Private Limited, Harsha Engineers International Limited, Bosch Limited, HAWE Hydraulics Private Limited, Festo India Private Limited, Elgi Rubber Company Limited, National Fittings Limited and Aequs Private Limited.
• There CNC machines are marketed and sold to diverse domestic and international customers across the world operating in various end-user industries (Application Industries).
• They intend to deepen their presence in the expanding aerospace and defence sectors, driven by anticipated good growth in India and globally.
• Company aims to boost market share in the CNC industry, leveraging its expertise in sophisticated 5-Axis machines.
• For Fy23, the Company had a Rs. 22 cr forex gain, excluding which it would have reported loss before tax.
• In H1FY24 with better scale, company has achieved break-even.
• Peers mentioned by compny in RHP like Mac power CNC Machines, Lokesh Machines and other capital goods players such as Elgi Equipments, Triverni Turbines, LMW and TD Power Systems are quoting at much lower PE multiples.. Only on P/BV basis ( 6x for Jyoti CNC Automation Limited), it is better than some of these peers.
• Jyoti CNC Automation IPO is coming at a PE ratio of 499x(fy23 earnings) and 560x (fy24 annualized earnings). However there is likely to be good improvement in profitability due to execution of substantial orders received recently in defence , aerospace and EMS sectors. Profitability is also likely to be aided by interest saving due to debt reduction from IPO inflows.
• Company has in the last 1 year issued shares to investors and promoters at significantly lower rates and above IPO price is fully streched and captures most of the positives.
• I intend to apply in Jyoti CNC Automation IPO. Valuations are fully streched and pricing is bit unfair to investors. In short term expected improvement in revenues and profits due to sizeable orders bagged last year may lend some support to share price post listing. Comfort level in present pricing is lacking and it will count as a risky bet.
• GMP as reported on social media has been around Rs. 70.
• Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.