Craftsman zooms 13%, nears record high on Sunbeam's biz acquisition plan

Shares of Craftsman Automation (CAL) moved higher by 13 per cent to Rs 5,441.40 on the BSE in Tuesday’s intra-day trade after the company proposed to acquire the whole or part of the business of Sunbeam Light weighting Solutions Private Limited (Sunbeam).

The stock of auto ancillary company is trading close to its record high of Rs 5,510, touched on December 22, 2023. In comparison, the BSE Sensex was up 0.23 per cent at 77,521 at 11:17 am.

In exchange filing, CAL said that the company has entered into a Memorandum of Understanding (MoU) with Sunbeam and Kedaara Capital Fund II LLP (Kedaara), for acquiring the whole or part of the business of Sunbeam (excluding certain specific assets of Sunbeam situated in Gurugram) in one or more tranches.

Meanwhile, the completion of the proposed transaction remains subject to inter alia, completion of due diligence, final approval of the Board of Directors of the company, execution of definitive documents, and completion of other customary conditions as may be required under law, CAL said, adding the detailed disclosure will be submitted after execution of necessary definite agreements in this relation.

Meanwhile, CAL has raised Rs 1,200 crore by issuing 2.73 million equity shares to qualified institutional buyers (QIBs). The company allotted shares at a price of Rs 4,400 per share. It allotted 170,240 shares to SBI Automotive Opportunities Fund and 151,400 shares to Government of Singapore.

CAL said that it intends to use the net proceeds to repayment / pre-payment, in full or in part, of certain outstanding borrowings availed by the company; acquisition of additional equity shares of its subsidiary, DR Axion from other shareholder, making it wholly owned subsidiary; and general corporate purposes.

CAL manufactures several components and sub-assemblies on supply and job-work basis according to client specifications in the auto, industrial and engineering segments. Key products in the auto segment include power train products, cylinder blocks, cylinder heads, cam shafts and crank cases for commercial vehicles (CVs), sports utility vehicles, two-wheelers, farm equipment and earthmoving and construction equipment. The company also has a non-ferrous sand foundry catering to power transmission equipment manufacturers.

Last month, CAL announced that it has inked a definitive agreement with Daerim International Co Limited, South Korea (Daerim) to acquire the residual 24 per cent shareholding held by Daerim in DRAIPL for a cash consideration of Rs 250 crore. The acquisition is expected to be completed by June 2024, post which DRAIPL will become a wholly owned subsidiary of CAL.

CRISIL Ratings expects CAL to register steady double digit revenue growth over the medium term, supported by increase in share of business with existing and new customers, besides new component addition.

Besides, the company, by way of its established and superior operating efficiencies and expertise in the machined components and die-cast component space, continues to register healthy operating profitability. Operating profitability is expected to stabilise at approximately 19-20 per cent over the medium term, which along with steady revenue growth, will ensure healthy annual cash generation, the rating agency said in rationale.