IPO Adda | Jyoti CNC Automation fixes price band of Rs 315-331 per share for its IPO.
MD and Chairman Parakram Singh Jadeja discusses issue details
MD and Chairman Parakram Singh Jadeja discusses issue details
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TVTranscript
00:00 Hello and welcome to NDTV Profit. You are watching IPO at DA and the company which is
00:04 coming out with an IPO early next week is Jyoti CNC Automation. It makes CNC equipment
00:13 which are used in various industries including aerospace, auto and auto components and general
00:19 engineering. Joining me is today Mr. Paragram Singh Jadeja who is the Chairman and Managing
00:24 Director of the company. The company is coming out with an IPO which opens on Jan 9th and closes on
00:29 Jan 11th. Price between 315 to 331 rupees per share. It is a fresh issue of 1000 odd crores
00:35 and that values the company at little over 7500 crores at the upper end of the price band. Mr.
00:41 Jadeja thank you very much for joining us on NDTV Profit and on IPO at DA. My first question to you
00:47 is sir is you are raising 1000 crores. What is the object of the issue or where are you going to use
00:55 these funds? So basically thank you very much to being here. I would like to tell you about this
01:06 prospect of the IPO. Out of this 1000 crores we are going to be largely around 475 crores we are
01:14 going to pay to our debt and close to 300 crores we are going to, 360 crores we are going to utilize
01:22 for the next 2 years long term working capital requirement and rest we are keeping in terms of
01:28 a GCF like that and basically to looking for the further opportunity on EMS business so keeping
01:36 a reserve to that. Give me a sense of the operations Mr. Jadeja you know I was going
01:42 through your RHPE you spoke about the fact that the profitability record is not much in FY23 you
01:48 were profitable in the first half you were profitable by 3.35 crores and the reason for
01:54 that being is some of the material subsidiaries were loss making especially your overseas
01:59 subsidiaries. So give me a sense of your operations and which are the subsidies which are loss making
02:05 and how do you plan to you know turn them around. So basically in let us say 2021 was completely
02:14 this COVID year that losses has been incurred and particularly this subsidiary companies are
02:22 mainly working on aerospace area and you know that very well that in COVID time the aerospace
02:30 industries was had badly hitted over there. But over a period now after that we have a robust
02:36 comeback over there in Europe also and we have close to let us say 1900 crores of worth of
02:42 orders are with us today and from that euro zone and mainly on aerospace and defense area to be
02:49 there. This orders we have received last year and our manufacturing cycle is let us say very
02:55 long manufacturing cycle into that large machines and all. So we have seen some development happen
03:02 in FY23 but we will see the better results are in FY24. Is there a cyclicality to your revenues
03:12 and profitability because while you did a 15 crore profits for FY23 the first half the profits
03:19 were 3.35 crores. So my question was that you know despite the fact that EBITDA margins are
03:25 higher in the first half compared to last financial year. Are you is there a cyclicality
03:33 or order booking sequence which is leading to you know depressed profitability in the first
03:39 half of the year? Your let us say the order book the way the order book has been built.
03:44 So next two years this order book are going to be executed there. So thus the overall utilization
03:50 everything will be improved so the profitability will be also is going to be improved in that
03:55 coming days there. Already we have seen into this first six month the improvements has been seen.
04:01 What is the kind of order book you are sitting on as a whole? Today is close to we have a 3,300
04:08 crores worth of order book are here. And it is spread over how many years?
04:12 This is going to be executed in next two years there.
04:15 And you will be able to execute the entire order book because you know 3,000 crores over next two
04:23 years which mean that you know it is an aggressive top line growth that you are planning.
04:27 Yeah we have already committed to the customers to execute these orders in a two and two and half
04:35 year basically max to be. Give me a sense of the profitability of your subsidiaries,
04:41 their loss making as of today. What is the kind of debt or borrowings which they have
04:46 because you are going to use some of the borrowings for yourself to pay your debt of
04:51 some of the subsidies. So if you can give me an indication of how your foreign subsidies
04:55 are going to be turned around. So basically in foreign subsidiary the scale up operations,
05:01 it is coming with this new order book and that will be a turnaround times are like that.
05:07 Basically turnaround is happening and in foreign subsidiary we do not have any long
05:12 term borrowings to be there. We have only working capital debts are like that.
05:16 And so this debt is primarily India based is it?
05:21 So basically debt is primarily India based and out of this let us say today is our debt is close
05:30 to 800 crores and we are paying close to 475 crores. So this our debt equity ratios is going
05:36 to reach less than 0.25 percentage and we are looking to be further reducing in next 2 to 3
05:42 years. We would like to be that is the direction we are going to look at that.
05:45 It is a very highly skilled and highly niche business CNC basically and there are not much
05:55 repeat orders that come in here. So how do you see this segment growing as a whole?
05:58 See this is we are into a manufacturing of a CNC machine that basically a backbone of
06:05 a manufacturing and you know that in a coming days in India the manufacturing sector based on
06:11 this all government make in India, Atmanirbha Bharat and all PLI schemes and the manufacturing
06:17 is growing and we are a backbone for them. So this industries will further grow in last
06:21 3 years is growing very well and we strongly believe that and all these research reports
06:26 are coming that in this in Indian operation as well as global this machine tool consumption
06:30 are going to increase in double digit on a next 5 years there.
06:32 So you mentioned that you have a 3000 odd crores of order book. Is there a split that
06:38 you can share with respect to how much is India based order book and how much is foreign?
06:42 So out of this 3300 crore close to 1900 crores are this order book at Europe and rest let us
06:55 say close to a 1100 crores in a domestic auto auto component, general engineering,
07:02 valves, pumps and others like that and close to a 300 crores on a EMS business are here.
07:08 When you say that you were planning to push your EMS business how aggressive it is you are pushing
07:17 and what is the kind of growth expected in that business for you going forward?
07:20 So basically the EMS business let us say up to the last year there was no EMS business and
07:27 these are new upcoming industries in our country and Jyoti has pursued this business and 5,
07:33 6 year back and started the headroom where we already started and developing the product
07:39 from 2015, 16 and now this business are here. So the let us say this year in our order book
07:46 it is close to 8 percentage are here and then in coming days we are looking to be further more
07:52 growth into EMS areas. Look at that all these mobile manufacturing the way is growing,
07:57 is growing on a more than 100% year on year and we would like to be participated over there basically.
08:03 Can you also give us a sense of the kind of capex that you have outlined going forward
08:09 because if you are growing at a very aggressive rate does your current capacity within India as
08:14 well as which is there in France Strasbourg is able to manage the kind of order book?
08:20 So today for a yeah so for a next 2 years our capacity is basically is in place and we are
08:29 not looking to be much larger any capex over here and we would like to do some balance capex if
08:36 required in a time over there basically. And which are the.
08:41 Reach out to clear this growth yeah. So is it fair to say that your major overseas
08:47 order book which is coming in is primarily in the aerospace and defence segment?
08:52 This is a 100% based on the aerospace and defence basically.
09:00 Oh okay. So basically right now we have a 2 growth drivers are like that okay. So basically a 2 growth
09:07 drivers we have today. One is this aerospace and defence and second is to be this EMS basically
09:13 there. Okay.
09:14 And future we are ready we are fully ready to capture the another 2 areas that called as the
09:20 EV and the semiconductor industries are coming over here. So all our product or our R and D team
09:25 is working towards to more and more to develop a new product to them.
09:28 And when do you see that products to go commercial EV and the semiconductor because already work has
09:36 started in both the segments with some many of the basically coming into it.
09:40 So once this players are coming over here we are fully ready basically up to that time.
09:46 One of the issues which also is there is with respect to a large or long working capital
09:55 cycle that you have. How do you plan to bring that down?
09:58 So already let us say we have plan out to let us say up to the last year we have a close to
10:06 300 days of a working capital was there. And due to this all our 200 plus product variants what we
10:14 have and until today we do not having a large orders to be there number of quantities to be
10:20 known there. So any model we are going to manufacture there will be a minimum batch
10:25 order quantity we need to produce. Thus this inventory days was little larger there.
10:29 And we are looking this year is to be based on this our order book and that 300 days are
10:36 reaching to be 200 days of this year in FY 24 and we are looking to be close to 175 days in
10:42 terms of a FY 25. So in a same SKU we are going to grow further more. So that is how it is become
10:50 a more optimized there. And what is the kind of you know working capital cycle in the industry
10:57 as a whole is 175 days the nominal one or you can bring it down further?
11:02 Yeah. 175 days is almost 6 months.
11:05 Is a end to end cycle in the industries. Yeah is a typical this manufacturing cycles like that.
11:12 And there is no way you can bring it down further.
11:15 If you look at the complete machine the machine the machines the size let us say
11:20 the price of the machines on aerospace and defense is close to a 2 billion 2 million
11:25 euro plus. So this is a large machine is takes long time to do the castings,
11:31 the machining, the assembly and the testings and like that.
11:35 You know within the within India I mean we have lot of manufacturing is now taking off
11:43 in India in a big way. How do you see the Indian market growing for you know aerospace
11:50 and defense as a whole? I know you are focusing on EMS as one of the segments which is growing
11:55 much faster. But within the aerospace and defense within the country do you see enough
12:00 orders getting created for your CNC machines? Yes. So basically India we are looking to be
12:10 very great opportunities with our existing client. Already see this after this make in India every
12:16 new investments are coming in aerospace also. Let's say this Tata Advanced System Limited.
12:21 This is one of the Tata Sikora ski is our customer. The Bharat 4th is our customers
12:26 and all of these ordinance factories. These are our customers. Now this industry is also
12:31 has been strategized by the government and already started giving us a yield to be there.
12:37 And we are looking further more a business in Indian this defense systems to be here.
12:44 So even as the capital goods or the defense manufacturing picks up that you will be the
12:50 direct beneficiary of that. You have 10% market share in this in the country today in the domestic
12:56 market. How do you plan to increase that market share? And when you look at the margins which
13:01 is currently at 14 14 and a half percent is it is that margin the base margin or is there
13:07 is there a way to improve that margin further? See basically based on the scale of operations
13:18 are going to be happen. The scale of operations going to give us a operational leverage and
13:24 definitely margin will improve in in the coming days. When this utilization will come definitely
13:30 it will be a the improvements are like that. And in terms of a market share in India we
13:37 have a one of the strategies like that we would like to be import substitute. Today
13:40 also there is a two third of machines are being imports and thus we would like to participate
13:46 it on those area where and to capture those new market segments to be there. The machines
13:51 are coming mainly from Japan and Germany. We would like to substitute to them basically
13:55 in the coming days. Finally sir some of the subsidies overseas subsidies even though you
14:00 have been able to make a profit for the first half and last year are still loss making.
14:07 You are saying that 3000 odd crores of order book will help you know convert many of them
14:12 into profitable. Do you see these subsidies getting profitable in FY 24 or will it be
14:18 a year more before they get profitable. So, almost in a first 6 month result if you look
14:27 at that from the last 6 year thus FY 23 to this growth rate in this our subsidiary also
14:35 is close to a more than 100 percentage. And based on this our order book definitely we
14:41 will turn around this in this year itself.
14:44 Mr Jadeja it was a pleasure talking to you today. Your IPO is opening on Jan 9 and closes
14:49 on 11th. Price between 315 to 331 rupees and you are raising 1000 crores from the market.
14:56 Thank you very much for joining us on NDTV and on being on IPO.
14:59 Thank you.
15:00 Thank you.
15:00 Thank you.
15:01 Thank you.
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