IPO listed on 16 Jan'24
Jyoti CNC Automation Ltd
Minimum Investment
₹ 14,895 / 45 shares
Grey market premium
₹ 100 (30% premium)
Issue price
₹ 331
Listing price
₹ 370
Listing gains
39 (12%)
Listing on
Jan 16, 2024
Our Verdict:
Avoid
- While the IPO might initially appear appealing due to the firm’s market dominance, impressive growth in revenue, and recent turnaround in profitability, investors should approach with caution. FY23 profitability includes an extraordinary gain of Rs 30.4 crore due to a loan waiver. Without this one-time gain, the firm would be incurring losses. Its history of financial losses and reliance on major customers adds to the risk factors affecting its long-term stability.
- Moreover, the firm’s financial situation appears shaky due to high debt levels, evidenced by a high Debt:Equity ratio and a low Debt Service Coverage ratio. The need for substantial working capital and negative cash flows also raise concerns about potential liquidity problems.
- Despite the grey market premium showing a favourable listing, the IPO seems aggressively priced at a PE multiple of 324.5. This valuation substantially surpasses that of its competitors and does not justify the risks involved.
- Given these factors, it would be prudent for investors to wait and assess the firm’s performance in the ensuing quarters, with a particular focus on its debt reduction plans, before making any investment commitments.
About the company
Founded in
17 Jan'91
Managing director
Parakramsinh Jadeja
- Jyoti CNC Automation Ltd (Jyoti CNC), renowned globally, specializes in the production of metal cutting CNC (computer numerical control) machines. It holds a leading position in India for producing advanced simultaneous 5-Axis CNC machines. Their extensive product range includes CNC Turning Centers, CNC Turn Mill Centers, Vertical and Horizontal CNC Machining Centers.
- As of September 30, 2023, the firm’s manufacturing capacity reached 4,400 machines annually in India and 121 annually in France. During the first half of FY24, the capacity utilization for the plants in India and France was recorded at 56.50% and 53.33%, respectively.
STRENGTHS
- Market Dominance: Jyoti CNC holds a strong position, being India's third-largest player with ~10% market share in FY23 and the 12th globally with ~0.4% market share in CY22.
- Impressive Growth: Between FY21 and FY23, the firm exhibited significant growth, with a 27% compound annual growth rate (CAGR) in revenue and a 75% increase in EBITDA.
- Healthy Return Ratios: In FY23, the firm achieved an impressive Return on Equity of 18.35% and a Return on Capital Employed of 9.5%, reversing the negative returns of the previous two years.
- Substantial Order Book: As of September 30, 2023, the firm boasts a robust order book worth Rs 3,315.33 crore, which is 3.6 times the revenue of FY23.
- Distinguished Client Base: The firm enjoys a diverse and prestigious global clientele, including major names like ISRO, BrahMos Aerospace Thiruvananthapuram, Turkish Aerospace, Uniparts India, Tata Advanced System, Bharat Forge, Shakti Pumps, Rolex Rings, and Bosch.
RISK FACTORS
- Weak Track Record: Jyoti CNC has a history of financial losses, reflected in a negative return on equity for FY22 and FY21. Additionally, its material subsidiary, Jyoti SAS, also reported losses in the six-month period ending September 30, 2023, as well as in the fiscal years 2023, 2022, and 2021.
- Dependence on Key Customers: A substantial portion of the firm’s revenue, approximately 32%, comes from its top three customers in the six months ending September 30, 2023. Losing any of these major customers could have a considerable adverse effect on the company’s performance and financial stability.
- High Debt Levels: The firm is heavily indebted, with a Debt:Equity ratio of 3.25 and a low Debt Service Coverage ratio of 0.7 as of September 2023. Insufficient cash flow generation could negatively impact its liquidity and ability to meet debt obligations.
- Delay in Statutory Payments: The firm has experienced delays in paying undisputed statutory dues, including provident fund, income tax, goods and service tax, and cess, primarily due to cash flow issues and insufficient liquidity during those periods.
- Substantial Working Capital Needs: In FY23, the firm required Rs 552.80 crore in working capital. The need for additional capital, potentially through further debt financing, could increase financial burdens like interest and repayment obligations, affect profitability, cash flow, and introduce more operational constraints.
- Cash Flow Issues: The firm reported negative cash flows from operations for the six months ending September 2023. Continuous negative cash flows or significant short-term financial deficits could severely impact the company's operational effectiveness and growth plans.
Issue details
Issue type
Mainstream
Issue size
₹ 1,000 crore
Fresh Issue
₹ 1,000 crore
OFS
₹ -
Price range
₹ 315 - 331
Lot size
45 shares
Issue Objective
The company intends to utilise the proceeds from the net issue towards:
- Repayment and/ or pre-payment of certain borrowings;
- Funding long-term working capital requirements; and
- General corporate purposes.
Dates
Bidding open
9 Jan'24
Bidding close
11 Jan'24
Allotment date
12 Jan'24
Refund date
15 Jan'24
Listing
16 Jan'24
IPO Reservations
Qualified institutional buyers
>75%
Non-institutional investors
<15%
Retail individual investors
<10%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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