Jyoti CNC makes decent debut; extends gains with 29% surge over issue price

Jyoti CNC Automation made a decent stock market debut on Tuesday with its shares listing at Rs 372, up 12 per cent over its issue price of Rs 331 per share on the BSE.

Post listing, the stock of the industrial products moved higher by up to nearly 29 per cent to Rs 426, till 12:10 pm.

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).

It has strong R&D capabilities used 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.

On excluding 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 brokerage said. 

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, said Sushil Financial Services in its IPO note.

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.