Specialty chemical manufacturer Aether Industries' initial public offering (IPO) opened for subscription today, May 24. The three-day issue will close on Thursday, May 26 and has fixed its price band at ₹610-642 per share.
The company plans to raise ₹808.04 crore via the IPO. Of ₹808.04 crore, the company aims to raise ₹627 crore through fresh issues and the remaining ₹181.04 crore via offer for sale (OFS) for up to 28.2 lakh shares by existing shareholders and promoters.
As per the DHRP, the funds raised via the issue will be used for funding capital expenditure requirements for the Proposed Greenfield Project, prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company, funding working capital requirements of the company; and other general corporate purposes.
The Gujarat-based company focuses on producing advanced intermediaries and specialty chemicals that involve complex and differentiated chemistry with technology as core competencies.
Experts are mixed on the issue. Some believe that Aether's multiple chemistry competencies to use for a wide array of products make it a distinguished market player over other chemical companies.
However, since the business is heavily dependent on manufacturing facilities, any shutdowns or slowdown in manufacturing operations can have an adverse impact on the company, others noted. Further, non-compliance or changes in any regulatory rule are also some key risks for the company.
Let's take a look at what brokerages recommend for Aether Industries IPO:
Angel One: Subscribe
The brokerage believes that Aether Industries' IPO valuations seem to be reasonable considering its historical top-line and bottom-line CAGR of 50 percent and 75 percent, respectively over FY19-21. Aether has a diversified customer base, strong financial track record, and higher return on equity, it said. Considering all the positive factors, Angel One believes this valuation is at reasonable levels. Hence, it has a ‘subscribe’ rating on the issue.
Religare Broking: Neutral
According to the brokerage, Aether is well-placed to benefit from growing industry trends given its differentiated portfolio of market-leading products. A constant focus on research and development (R&D) and a long-standing diversified customer base will help the company outperform industry growth, it noted.
Religare believes that the Indian specialty chemicals market is expected to grow at 11.2 percent CAGR over CY20-25. Given this, the company is primed to benefit from its product portfolio expansion and diversification in other business segments, explained the brokerage.
However, it believes that despite a strong financial performance, valuations appear expensive at 71x FY22 annualized post EPS. Volatile raw material prices and high debt levels continue to shadow the company’s performance; hence, it has a ‘neutral’ stance on the IPO.
Axis Capital: Not Rated
As per the brokerage, the company’s R&D focus to leverage chemistry and technology has acted as a differentiating factor to attain leading market positions. Moreover, the company’s products have applications across a wide spectrum of uses in pharmaceuticals, agrochemicals, material science, and coatings, among many others, making the portfolio differentiated, it added.
It also noted that Aether is one of the few companies in the specialty chemicals sector in India that has deployed continuous reaction technology as a core technology competency at all stages. However, the brokerage firm believes that entry barriers, customer validation or approvals, and continuous improvement in operating efficiencies will act as headwinds for the company.
