Aeroflex Industries IPO opens today: 10 things to know before buying shares

2) Price Band

The price band for the book-built issue has been fixed at Rs 102-108 per share.

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3) Offer Details

The Mumbai-based flexible flow solutions provider intends to raise Rs 351 crore via public issue, at upper price band. The IPO comprises a fresh issuance of shares worth Rs 162 crore, and an offer-for-sale (OFS) of 1.75 crore shares by promoter entity Sat Industries.

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Before filing the red herring prospectus with RoC, the company raised Rs 76.14 crore in a pre-IPO placement by selling 86.9 lakh equity shares to institutional investors, including Ashish Kacholia, Carnelian Structural Shift Fund, Bengal Finance, Mitul Prafulbhai Mehta, Samedh Trinity Partners, Jagdish Master, Shyamsundar Basudev Agarwal, and VPK Global Ventures Fund.

4) Objectives of Issue

The fresh issue proceeds, excluding offer expenses, will be utilise for repaying certain borrowings amounting to Rs 32 crore, working capital requirements of Rs 84 crore, and the remaining general corporate purposes and acquisitions.

The offer for sale money will go to selling shareholder.

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5) 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 Rs 14,040 for one lot (130 shares x issue price of Rs 108 per share) and Rs 1,96,560 (14 lots) would be the maximum.

High networth individuals with investment limit between Rs 2 lakh to 10 lakh can invest a minimum of Rs 2,10,600 (15 lots), and their maximum investment would be Rs 9,96,840 (71 lots).

Half of the total offer size is reserved for qualified institutional buyers, 15 percent for high networth individuals (non-institutional investors), and the remaining 35 percent for retail investors.

6) Company Profile

Aeroflex manufactures metallic flexible flow solution products, which play a critical role in transfer of substances (air, liquid and solid) in any industrial or commercial ecosystem, including 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, and compensators, catering to global as well as domestic markets.

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It exports products to more than 80 countries including Europe, USA and others, which contributed over 80 percent to revenue from operations.

With manufacturing facility at Taloja, Navi Mumbai (Maharashtra), the company served 723 customers in the year ended March FY23 (including 506 customers in the domestic market), increasing from 606 customers in FY22.

7) Financial

Aeroflex has recorded healthy financial performance in past years, with revenue from operations growing at a CAGR of 36.43 percent during FY21-FY23 to Rs 269.5 crore in the year ended March FY23. Profit grew at a CAGR of 124 percent during the same period to Rs 30.15 crore and EBITDA increased at a CAGR of 55.54 percent to Rs 54.03 crore. The EBITDA margin expanded to 20.05 percent in FY23, from 19.39 percent in FY22 and it was at 15.43 percent in FY21.

But, the return on equity and return on capital employed at 26.43 percent and 31.91 percent at the end of FY23 fell from 31.9 percent and 36.29 percent in FY22 respectively.

The debt-to-equity ratio improved to 0.39 in FY23, compared to 0.45 in FY22, which may improve further given the expected repaying of debts via fresh issue money.

8) Promoters and Management

Promoters hold 91.09 percent shareholding in Aeroflex including BSE & NSE-listed Sat Industries' 84.57 percent stake, while the public shareholding stands at 8.91 percent including ace investor Ashish Kacholia, and Vikas Khemani's Carnelian Structural Shift Fund.

Asad Daud is Managing Director of the company, while Mustafa Abid Kachwala is the Whole-time Director and Chief Financial Officer.

Kinjal Kamlesh Shah is the Company Secretary and Compliance Officer of the Mumbai-based firm.

9) Risk Factors

Here are certain risk factors to consider:

a) The export operations contributed more than 80 percent of revenue from operations, out of which USA contribution at 28 percent.

b) The company is dependent on China for a significant portion of raw material suppliers.

c) The company requires significant amounts of working capital and a significant portion of working capital is consumed in trade receivables and inventories.

d) The firm faces competition from other large and small global and domestic players, which may affect its business operations and financial conditions.

e) It had experienced negative cash flows in the recent past and may have negative cash flows in the future.

f) Aeroflex derives significant portion of revenues from top five customers located in India and globally.

10) Listing Date

The company in consultation with BSE will finalise basis of 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.

Aeroflex Industries shares, which will debut on the BSE and NSE on September 1, traded at around 60 percent premium over the upper price band of Rs 108 per share, in the grey market, analysts said on anonymity. The grey market is an unofficial platform for trading in IPO shares till the listing.

Pantomath Capital Advisors is the merchant banker to the issue, and Link Intime India is the registrar to the offer.