Aeroflex Industries Ltd. IPO
Published by Sharekhan Education | August 22, 2023
Aeroflex Industries Ltd IPO has an issue size of Rs.351 Cr. Price band is Rs. 102–108. The issue opens on Tuesday, 22 nd August 2023 and closes on Thursday, 24 th August 2023
Company Overview:
Aeroflex Industries Ltd. not only provides environmentally friendly metallic flexible flow solution products essential for transferring substances in various industrial ecosystems but also maintains a diverse product portfolio encompassing Stainless Steel Corrugated Flexible Hoses, SS Braiding, Interlock Hoses, and Assemblies. Catering to a wide array of end-user industries, such as steel, oil & gas, refineries, aerospace & defense, and metals & mining, the company’s clientele includes distributors, fabricators, Maintenance Repair & Operations companies, and Original Equipment Manufacturers (OEMs). Additionally, the company’s global presence is highlighted by its export activities, reaching more than 80 countries.
Objects of Issue:
Aeroflex Industries Ltd IPO consists of a fresh issue of equity shares aggregating to ₹ 162 crores, and an offer for sale (OFS) of up to ₹ 189 crores by existing shareholders. The company will utilize the proceeds from the fresh issue to repay certain outstanding borrowings and fund its working capital requirements. Applicants must apply for a minimum of 130 shares, with subsequent multiples. After allotment, both BSE and NSE will list the shares.
Competitive Strengths:
Moreover, the company establishes itself in global markets by leveraging its capabilities to manufacture a diverse range of products with quality consistency. Its advantageous position in capturing the requirements of diverse end-user industrial sectors is a result of its track record of successfully commercializing and scaling up new products. Due to the critical nature of the applications, the company’s solutions undergo rigorous product approval systems, serving as significant entry barriers for new players.
Business Strategy:
Aeroflex Industries intends to scale up its Design and R&D efforts to undertake complex research on new product applications. The company plans to expand its operations in the USA, Europe, Far East Region, Middle East, and North Africa by opening strategic delivery locations. The aim is to enhance its domestic presence and build market share by leveraging exposure in the export markets. The company intends to automate various processes to improve energy usage efficiency, eliminate waste, and improve productivity.
Key Concerns:
Moreover, any shutdown in the manufacturing operations of the single manufacturing unit could adversely affect the business. The company’s significant requirement for working capital, with a substantial portion allocated to trade receivables and inventories, poses a challenge. Additionally, a considerable portion of raw materials being imported from China introduces vulnerability. The potential loss of a major supplier or an increase in the cost of raw materials may impact the company’s ability to pass these costs on to customers.
Financials:
The company achieved operating revenue growth at a 36.4% CAGR over FY21-23. EBITDA experienced a growth of 55.5% CAGR during the same period, while Net Profit delivered a remarkable 123.9% CAGR over FY21-23. More than 80% of their revenue from operations came from exports. Return on Equity stood at 26.4% in FY23. The issue, priced at the upper end of the range (₹102-108), is considered richly priced with a P/E multiple of 46.3x based on FY23 post-issue fully diluted EPS.
Source: IPO Red Herring Prospectus
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