Jyoti CNC Automation IPO: 10 key risks investors should know before subscribing to the issue

Jyoti CNC Automation Limited is a CNC machine manufacturer and supplier. The business is headquartered in India and focuses on producing and distributing CNC machinery.

Also Read: Jyoti CNC Automation IPO: GMP, subscription status, review, other details. Apply or not?

The product line consists of multi-tasking machines, simultaneous 3-axis and simultaneous 5-axis CNC machining centres, CNC turning centres, CNC turning-milling centres, CNC vertical machining centres (VMCs), and CNC horizontal machining centres (HMCs).

The company’s promoters are Vikramsinh Raghuvirsinh Rana, Parakramsinh Ghanshyamsinh Jadeja, Sahdevsinh Lalubha Jadeja, and Jyoti International LLP.

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Retail investors responded so strongly to the Jyoti CNC Automation IPO subscription on day 1 that it was fully booked within 30 minutes of opening. Jyoti CNC IPO subscription status was 2.52 times at the end of day 1.

Jyoti CNC Automation IPO’s retail investors portion was subscribed 8.28 times, Non Institutional Investors (NII) portion was subscribed 3.63 times, and Qualified Institutional Buyers (QIB) portion was booked 2%. Employee portion was subscribed 3.69 times.

Also Read: Jyoti CNC Automation IPO: Issue fully booked on day 1, retail portion subscribed 8.28x

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Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

Jyoti CNC Automation IPO key risks

• The company has previously experienced losses and a negative return on equity as a result. Any losses in the future could be negative to the growth prospectus and would prevent the company from taking any further steps, like paying dividends.
• Due to the lack of long-term contracts with suppliers, the company’s operations and financial performance could be negatively impacted by a large rise in the price, a decrease in the quantity or quality of these input materials, or both.
• The company’s transportation of raw materials and completed goods is entirely dependent on outside logistics service providers.
• Employee benefit costs make up a sizable portion of the business’s fixed operating costs, and the company employs a large workforce. Their profitability may suffer from an increase in employee benefit expenses. Furthermore, any kind of dispute with its employees, including work stoppages, increased wage demands, or other issues, could negatively impact the company’s operations.
• The operations of the company primarily rely on machinery. Any failure in its equipment will have a big effect on their operations, earnings, and future growth.
• The company, its promoters, directors, and subsidiaries are all parties to pending legal actions (including criminal actions) that, if found against the company, could have a significant negative impact on its operations, cash flows, business, and financial health.
• The company may lose future and current orders as well as be financially liable for warranty claims if it does not meet the quality standards set by its customers for its processes and products.
• Additionally, the market share and operational outcomes of the company could be negatively impacted by its inability to innovate its product offerings and adjust to changes and advancements in technology.
• A portion of the issue’s net proceeds will be used by the company to fund its long-term working capital needs, which are estimated and predicated on certain assumptions and figures and have not been evaluated by a bank or other financial organisation.
• The business has a high working capital requirement, and its operations will suffer if it is unable to raise enough working capital.

Also Read: Jyoti CNC Automation’s ₹1,000-crore IPO opens today: 9 important things from RHP about the issue

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 09 Jan 2024, 05:59 PM IST