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16 September 2023

Aeroflex Industries IPO: Soaring High in the Flexible Flow Solutions Sector

Introduction:

Aeroflex Industries Limited, previously known as Suyog Intermediates Private Limited, was founded in 1993 and has since become a leading manufacturer and supplier of environmentally-friendly metallic flexible flow solution products. With a wide-ranging product portfolio, the company offers solutions such as braided hoses, unbraided hoses, solar hoses, gas hoses, vacuum hoses, braiding, interlock hoses, hose assemblies, lancing hose assemblies, jacketed hose assemblies, exhaust connectors, exhaust gas recirculation (EGR) tubes, expansion bellows, compensators, and related end fittings. As of March 31, 2023, Aeroflex Industries boasted an extensive product line with more than 1,700 Product SKUs (Stock Keeping Units).

IPO Details:

The Aeroflex Industries IPO was a book built issue with a total issue size of Rs 351.00 crores. It consisted of a fresh issue of 1.5 crore shares aggregating to Rs 162.00 crores and an offer for sale of 1.75 crore shares aggregating to Rs 189.00 crores. The IPO bidding phase ran from August 22, 2023, to August 24, 2023. Allotment results were announced on August 29, 2023, and the shares were officially listed on both BSE and NSE on August 31, 2023. The IPO was priced in the range of ₹102 to ₹108 per share, with a minimum lot size of 130 shares, requiring a minimum investment of ₹14,040 for retail investors. High Net Worth Individuals (HNIs) had to apply for a minimum of 15 lots (1,950 shares), amounting to ₹210,600, while bNII needed a minimum of 72 lots (9,360 shares), totaling ₹1,010,880.

Key Players:

Pantomath Capital Advisors Pvt Ltd served as the book running lead manager for the Aeroflex Industries IPO, and Link Intime India Private Ltd acted as the registrar for the issue.

Stock Performance:

Aeroflex Industries Limited's stock (Arrow) had a 52-week high of ₹196.35 on August 31, 2023, and a 52-week low of ₹153.50 on September 5, 2023. On the closing date of September 15, 2023, the stock closed at ₹156.45.

Ownership Structure:

Sat Industries Limited and Italica Global FZC are the promoters of the company. The pre-issue shareholding stood at 91.09%, which reduced to 66.99% after the IPO.

Financial Performance:

Aeroflex Industries exhibited a robust financial performance, as seen in its financial statements. As of March 31, 2023, the company's assets had grown to ₹213.98 crores, with a significant revenue of ₹269.48 crores. The profit after tax was reported at ₹30.15 crores. The net worth of the company stood at ₹114.09 crores, with reserves and surplus amounting to ₹45.01 crores. The total borrowing was reported at ₹45.01 crores.

Performance Indicators:

Key performance indicators (KPIs) for the Aeroflex Industries IPO include a P/E ratio of 40.91, an impressive Return on Equity (ROE) of 26.43%, a Return on Capital Employed (ROCE) of 31.96%, a low Debt/Equity ratio of 0.39, an Earnings Per Share (EPS) of ₹2.64, and a Return on Net Worth (RoNW) of 26.43%.

Objectives of the Issue:

The net proceeds from the IPO were allocated for various purposes, including:

1. Full or partial repayment and/or prepayment of certain outstanding secured borrowings, including foreclosure charges, if any, availed by the company.
2. Funding working capital requirements of the company.
3. General corporate purposes and unidentified inorganic acquisitions.

Expert Opinion:

Noted that the company enjoys a virtual monopoly and has demonstrated steady growth in its top and bottom lines for the reported periods. With over 80% of its revenue coming from exports and its status as an Exporter of Units (EoU), it holds a strong market position. Additionally, it is a dividend-paying company. However, based on its financials, the IPO appears to be fully priced, factoring in most near-term positives. Diligent investors with a medium to long-term investment horizon may find value in the IPO.

Subscription Status:

The Aeroflex Industries IPO garnered significant investor interest, with a subscription rate of 97.11 times as of August 24, 2023. Retail investors displayed strong participation with a subscription rate of 34.41 times, while the QIB and NII categories demonstrated substantial interest.

Conclusion:

Aeroflex Industries Limited has established a strong presence in the market for metallic flexible flow solutions, both in India and globally. Its robust financial performance and diversified product portfolio have contributed to its success. The successful IPO indicates investor confidence in the company's future prospects and its ability to continue its growth trajectory in the flexible flow solutions sector. As the company embarks on the next phase of its journey, investors will closely monitor its performance in this niche industry.

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