The ₹351 crore initial public offering (IPO) of Aeroflex Industries opened for subscription on August 22 and will close on August 24. The price band of the issue has been fixed in the range of ₹102-108 per share. The company doesn’t have any listed peers in India.
About the issue: The IPO comprises fresh issuance of shares worth ₹162 crore and an offer-for-sale (OFS) of 1.75 crore shares worth ₹189 crore by promoter entity Sat Industries.
Subscription Status: The public issue has received a strong response from investors and was fully subscribed within just an hour of bidding. At 1:00 pm, on the second day of bidding, the issue was subscribed to 11.57 times. Its Non-Institutional Investors (NII) portion was subscribed to the most, 24.51 times, while the retail and Qualified Institutions Buyers (QIB) part was subscribed to 11.96 times and 1.22 times, respectively. The quota reserved for the 'others' category was also bid 4.77 times.
GMP: Shares of Aeroflex Industries were available at a premium of ₹65 in the grey market today, indicating a strong listing.
Lot Size: Investors can bid for a minimum of 130 equity shares and in multiples of 130 shares thereafter. Hence, the minimum investment by retail investors would be ₹14,040 for one lot.
Objective: The fresh issue proceeds, excluding offer expenses, will be used for repaying certain borrowings amounting to ₹32 crore, working capital requirements of ₹84 crore, with the remaining for general corporate purposes and acquisitions.
Anchor Investors: Ahead of its IPO, the Mumbai-based company said it has garnered ₹103.68 crore from anchor investors. Aeroflex informed the bourses that it allocated 95,99,980 shares at ₹108 apiece to anchor investors. Out of the total anchor book, 55 percent allocation was made to four domestic mutual funds through a total of 9 schemes amounting to ₹57 crore, Aeroflex said. Nippon Mutual Fund took the single largest allocation, around 20 percent of the total anchor book size, whereas other funds like Invesco Mutual Fund, White Oak Mutual Fund, BOI Mutual Fund, Winro Commercial and Societe Generale followed the pack, it added.
About the Firm: Aeroflex Industries is a manufacturer and supplier of environmentally friendly metallic flexible flow solution products. They cater to both global and domestic markets, exporting their products to over 80 countries, including Europe and the USA. The company’s product portfolio comprised Stainless Steel Corrugated Flexible Hoses (with and without braiding), SS Braiding, Interlock Hoses and Assemblies catering to a diverse range of end-user industries for the controlled flow of all forms of substances, including air, liquid, and solid.
As on March 31, 2023, AIL had more than 1,700 Product SKUs (Stock Keeping Units) in their product portfolio. AIL operates out of a single manufacturing facility for the manufacture of all of its products located at Taloja, Navi Mumbai in the state of Maharashtra spread across 3,59,528 square feet of area. As of Jan 31, 2023, the company reported it has installed a production capacity of 1,10,02,389 Mtr with utilised capacity of 76,08,87 Mtr reflecting 69 percent capacity utilisation. AIL primarily exports its products to more than 80 countries including Europe, the USA and others. During FY23, AIL supplied its products to 723 customers.
Financial Performance: The company’s total income in FY23 increased by 11.82 percent YoY to ₹269.4 crore from ₹240.9 crore in FY22. The company’s profit after tax for FY23 increased by 9.62 percent to ₹30.1 crore in FY23 from ₹27.5 crore in FY22. In FY23, FY22 and FY21, the company’s ROE was 30.54 percent, 38.19 percent and 10.79 percent, respectively. The company’s ROA was 15.17 percent, 15.99 percent and 3.82 percent, respectively in FY23, FY22 and FY21. AIL’s debt to equity ratio also reduced during the same period to 0.39 in FY23 from 0.45 in FY22 and 0.90 in FY21.
The company's revenue from operations posted a CAGR of 36.43 percent in FY21-FY23 to ₹269.5 crore in the year ended March FY23 while profit recorded a CAGR of 124 percent in the same period to ₹30.15 crore and EBITDA jumped at a CAGR of 55.54 percent to ₹54.03 crore. The EBITDA margin expanded to 20.05 percent in FY23, from 19.39 percent in FY22 and 15.43 percent in FY21.
Book Running Managers: Pantomath Capital Advisors is the merchant banker to the issue, and Link Intime India is the registrar to the offer.
Important Dates: The company is likely to finalise its allotment of IPO shares by August 29 and will transfer equity shares to the demat accounts of eligible investors by August 31, while the unsuccessful investors will get refunds by August 30.
Meanwhile, the stock will debut on the BSE and NSE on September 1
What brokerages say:
Most analysts have a ‘subscribe’ rating for the issue on the back of its dominant market share in the business, strong clientele, healthy financial performance, and decent return ratios.
Anand Rathi: Subscribe – Long Term
Aeroflex Industries is a global flexible flow solutions provider operating in an addressable market, catering to diverse industry segments with the export oriented business model. At the upper price band, the company is valuing at a P/E of 46x FY23 earnings with a market cap of ₹13,966 million post issue of equity shares and a return on capital employed of 31.91 percent.
AIL is looking to benefit from: 1) Operating in a huge addressable market, 2) Expansion of product portfolio, 3) Monopolistic market leadership in India, 4) High entry and exit barriers, and 5) Solid R&D investments. At the upper end of the price band, the P/E translates to 46x on FY23 EPS of ₹2.33.
Swastika Investmart: Subscribe
Aeroflex's future strategies look promising. The company plans to expand its global and domestic businesses, and it is investing in new technologies to improve its products. We believe that these strategies have the potential to drive long-term growth and profitability for the company. Overall, we believe that the Aeroflex Industries Limited IPO is a good investment opportunity.
The company is a leading player in the steel hoses industry, both in traditional segments, as well as, new emerging ones. At the upper band of 108, the IPO is priced at 46.3x P/E. Their focus on R&D also helps ensure that they retain their first-mover advantage in the market, staying ahead of potential peers in the future. Considering all of the above, combined with a diverse product portfolio, global presence, and strong financials, we assign a SUBSCRIBE rating to the IPO.
SBI Capital: Subscribe for long term
The company has a unique business model in the flexible flow solution area. With decent return ratios and margins, the risk-reward ratio for long-term investors looks favourable. Investors can subscribe to the IPO for a long-term investment perspective.