Jyoti CNC Automation IPO Review

Jyoti CNC Automation IPO Review: The manufacturing industry is in full swing thanks to increased demand for automobiles and production-linked incentives (PLI). make in india Exporting to the world is standard.

All this will benefit the manufacturing sector, but at the same time, this economic scenario will definitely increase the demand for manufacturing, which is a base industry. Computer numerical control (CNC) machines.

These machines are used by manufacturing companies to create complex tools. CNC machines are numerically controlled machines that are programmed to produce desired tools with extreme precision.

This Jyoti CNC Automation IPO review looks at operations, financials, GMP, strengths, weaknesses, peer comparisons, and more.

Jyoti CNC Automation IPO Review

Today we will talk about one of the leading manufacturers of these CNC machines. Jyoti CNC Automation company is gearing up for IPO issue of Rs. 1000 Cr will be released on January 9, 2024. The issue will close on January 11 and be listed on the exchange on January 16, 2024.

About Us

The company is the third largest manufacturer of metal cutting computer numerical control (CNC) machines, with a 10% market share in India and 0.4% share globally.

The company is a leading manufacturer of 5-axis CNC machines, offering more than 200 variants across 44 series. We have a portfolio of CNC turning centers, turnmill centers, vertical and horizontal machining centers.

Jyoti CNC has over 20 years of experience designing and manufacturing tools for companies in the aerospace, defense, auto parts, general engineering, and more. We supply to Romania, France, Poland, Belgium, Italy and the UK.

The company has three manufacturing facilities, two of which are located in Rajkot, Gujarat and one in Strasbourg, France. The Gujarat and France facilities each have their own research and development centers employing 141 people.

Jyoti’s clients include renowned brands in the domestic market including Bharat Forge, Tata Advanced Systems and Shakti Pumps (India). International customers include Bosch Ltd, Turkish Aerospace and Hawe Hydraulics.

The company’s largest customer is the automotive segment, which contributed 46.68% to FY23 revenue. Aerospace and defense brought in 20.32% of revenue and general engineering brought in 19.58%.

Jyoti’s top three customers are responsible for 14% of FY23 revenue. 16% of revenue came from the top five clients and 20.08% of FY23 revenue was paid by the company’s top 10 clients.

industry information

The Indian Industrial Production Index, which tracks all forms of industrial activity in the country, recorded its highest monthly growth at 11.4% in July 2023. The index has expanded 5.7% since July 2022.

India’s goods exports have recovered from pandemic lows to record the highest ever annual export growth of $447.46 billion, up 6.03% annually. Rapid recovery in key markets, increased consumer spending, and increased spending have stimulated this demand.

India’s manufacturing sector, to which Jyoti CNC also supplies, is poised for strong growth, driven by the China+1 strategy and Production Linked Incentive (PLI) scheme.

India has signed a trade agreement with the UAE worth $100 billion over the next five years, up from $60 billion in 2022. India and Australia also signed a temporary free trade agreement in April 2022. This is expected to double bilateral trade from $27 billion in 2022 to $50 billion in 2022. Besides enhancing market access over the next five years, it will also benefit Indian manufacturing through availability of cheaper raw materials such as steel, aluminum and textiles.

Jyoti CNC Automation – Finance

Jyoti CNC saw a 27% increase in revenue from Rs. 750 Cr in FY22 to Rs. 953 Cr in FY23. The company continues to grow at a CAGR of 27% since FY21. However, this double-digit growth does not translate into increased net income.

The company was profitable in FY23 with a net profit of Rs. 15.06 Cr in FY23, net loss of Rs. 48Cr in FY22. The company’s net profit for H1FY24 is only around Rs. 3.35 Cr is less than half of the FY23 result.

A very important thing to note is that in FY23, the company reported an exceptional profit of Rs. 30.4 Cr, on account of loan waiver. Excluding these exceptional profits, the company would suffer a loss of 50 million won. 15.34Cr.

The company’s debt ratio is 3.25 times as of the first half of 2024. The company has current and non-current borrowings worth 50 million won. 717.11 and 104.29 Cr respectively. However, while the debt-to-equity ratio has decreased from 19.25x, it is still significantly higher than the highly leveraged areas.

A closer look at the balance sheet shows that the company holds inventory worth Rs. 868.35 Cr is almost 50% of total assets. Additionally, the company has a very low inventory turnover ratio of just 0.48x as of H1FY24.

main players

If we compare Jyoti CNC with its peers, it ranks 3rd largest in the list. However, the company has one of the lowest earnings per share and lowest net asset value.

The maximum price band of Rs. 331, the company trades at a very high PE ratio of 324x. Take a look below to see how Jyoti CNC compares to its peers.

Company Strengths

1. It is one of the leading CNC machine manufacturers in India and around the world with a wide range of products specialized for multiple industries.
2. The company is diversified across business segments comprising aerospace, automotive, general engineering, EMS and molds.
3. The company’s integrated manufacturing unit ensures that every aspect of manufacturing is kept in-house, requiring no third-party input.
4. As of Q2 2023, the company’s order volume stands at Rs 3,315 Cr., of which Rs. 1896 Cr belongs to the Aerospace and Defense sector.

company’s weaknesses

1. The company’s top three clients alone accounted for 32% of first-half 2024 revenue and 13.95% of fiscal 23 revenue. We have seen an increase in the company’s exposure to its largest customers in recent quarters.
2. The company’s debt to equity capital is 3.25 times, which is a sword hanging on the balance sheet. If the debt-to-equity ratio exceeds 2x, the leverage of the company increases significantly.
3. Jyoti CNC recently posted profits in FY23. However, profit growth in the first half of the year was really slow.
4. 50% of the company’s total assets are locked up in inventory. The company also had very slow inventory turnover.
5. The company’s statutory auditors have expressed concern about the company’s subsidiaries, whose net assets have been eroded due to losses accumulated in previous years.

Jyoti CNC Automation IPO Review – GMP

Shares of Jyoti Automation CNC Ltd were trading at a premium of 25.68% in the gray market on January 5, 2024. The stock in Gray Market was trading at Rs 416. This gives a premium of Rs 85 per share to the ceiling price of Rs 331. .

Key IPO Information

promoter: Parakramsinh Ghanshyamsinh Jadeja, Sahdevsinh Lalubha Jadeja, Vikramsinh Raghuvirsinh Rana and Jyoti International
LLP

Book Operations Lead Manager: Equirus Capital Private Ltd, ICICI Securities Ltd and SBI Capital Markets Ltd

Proposal registered by: Link Intime India Pvt Ltd

purpose of the problem

1. The net proceeds of the issuance of Rs 475 Cr will be used for prepayment of certain debt instruments availed by the company.
2. The remaining capital will be used to fund the Company’s regular working capital requirements and general corporate purposes.

conclusion

We now come to the end of our Jyoti CNC Automation IPO review with a brief overview of what the company does, how much market share it holds in India, and what opportunities lie ahead for the company. In our view, the company is showing good revenue growth, but its profit margins are not matching these numbers.

Profits reported in FY23 are also not calculated as they are part of exceptional profits. This, combined with high debt, remains a risk that investors need to be aware of. So, do you want to take the risk and apply for an IPO? If so, let us know what excites you most about the company in the comments below.

Written by Nasir Hussein

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