Flexible flow solution products maker Aeroflex Industries is ready to list its shares on the bourses on August 31. Analysts think the listing premium could be in the range of 50-60 percent over the issue price of Rs 108 per share, citing the first mover advantage enjoyed by the company, robust subscription demand for IPO, and healthy financial performance recorded in the past with improving debt-to-equity ratio.
The Mumbai-based company has raised Rs 427 crore via pre-IPO placement and initial public offering in the recent past. The Rs 351-crore public issue has garnered overwhelming response from investors, subscribing 97.11 times during August 22-24. Qualified institutional buyers have bought 194.73 times the reserved portion, followed by high networth individuals which have bid 126.13 times the allotted quota and retail investors 34.41 times.
"We expect shares of Aeroflex Industries to open in the range of Rs 160-170 per share, an upside of around 60 percent over its upper band price of 108 per share," said Parth Shah, research analyst at StoxBox.
He feels the expected upside seems to be justified as the company’s continuous focus on R&D and sound manufacturing infrastructure has enabled it to meet the high-volume demand of customers, creating high entry barriers for smaller firms along with sound past financial performance.
Ashish Kacholia-backed Aeroflex’s business has effectively scaled its operational margins to 20.1 percent in FY23 compared to 15.4 percent in FY21 and its debt-to-equity ratio has improved to 0.39x in FY23, from 0.9x in FY22.
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The revenue from operations during FY21-FY23 grew at a CAGR of 36 percent, while EBITDA (earnings before interest, tax, depreciation and amortisation) and profit increased at a CAGR of 56 percent and 126 percent respectively during the same period.
The subsidiary of listed promoter Sat Industries traded at 60 percent premium over the issue price, in the grey market, an unofficial platform for trading in IPO shares till the listing, analysts said on anonymity.
The grey market premium has reduced from 70 percent to 60 percent, especially after closing the public issue, which may be due to volatility in the equity markets.
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"Considering robust demand response by investors in all categories, we expect 50 percent listing gain," said Prashanth Tapse, research analyst at senior VP Research at Mehta Equities.
Despite expensive valuations at the higher end, he also said the premium listing is justified as the offer got stellar demand for its unique eco-friendly product, which is said to be an alternative to rubber-based hoses and business demand remained strong in both international and domestic markets.
Aeroflex has no immediate peers to compare. Hence the company enjoyed first mover advantage of listing on the bourses.
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The company manufactures environment-friendly metallic flexible flow solution products like multiple variety of hoses, tubes and hose assemblies. The company’s clientele includes distributors, fabricators, maintenance repair and operations companies (MROs), original equipment manufacturers (OEMs), and companies operating in a wide range of industries. Moreover, the company has recently forayed into manufacturing products made of bronze.
"The company is likely to benefit from growth prospects in traditional industrial segments like manufacturing, automotive, oil & gas among others as well as emerging industries like solar, lithium-Ion battery management and robotics among others," Reliance Securities said.
Moreover, a strong track record of commercialising and scaling up new products and R&D capabilities puts the company in a good position to capture the requirements of diverse end user industrial sectors, the brokerage added.
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