A new entrant to the primary market on Wednesday will be Apollo Micro Systems, which is set to open its initial public offering.
"The IPO of Rs 156 crore of face value of Rs 10 each for cash at a premium will be offered through a book-building route at a price band of Rs 270–275 per equity share," Apollo Micro Systems had said in a statement earlier.
The company fixed a price of Rs 270-275 per share and said that the proceeds will be used to meet additional working capital and other general corporate purposes.
Further, a discount of Rs 12 on the issue price will be offered to retail investors and to eligible employees.
Aryaman Financial Services is the sole book running lead manager to the issue.
The company offers integrated solutions to the aerospace, defense, home land security and transportation sectors.
Multiple brokerages recommend subscribing to the issue, citing reasonable valuations and strong sectoral outlook as well.
Apollo Micro | Rating: Subscribe
The brokerage highlighted that it reported a CAGR of 54.2% and 58.3% on revenue and net profit fronts respectively over FY2013-2017. On its upper band of price of Rs 275, the issue is priced at PE ratio of 27.1x of its H1FY2018 annualised EPS of Rs 10.2.
“We believe that the IPO is fairly priced leaving a room for upside. Hence, we recommend to Subscribe the IPO,” it said in a report.
Angel Broking | Rating: Subscribe
The brokerage house highlighted aspects regarding valuation and said that the pre-issue P/E works out to 29x 1HFY2018 annualized earnings, which is lower compared to its peers like Astra Microwave (trading at 36.2x its 1HFY2018 annualized earnings).
Further, the company has a strong financial record and return ratios compared to Astra Microwave.
“Hence, considering the above positive factors, growth in the defence industry we recommend subscribe on the issue,” the report added.
Choice Broking | Rating: Subscribe with Caution
Choice Broking believes that the business is fairly priced, leaving limited space for further upside. Defense investment theme is long term in nature. “Given the strong sector outlook, we believe that the stock would provide returns in medium to long term,” the report said.
However, the key concern linked to the sector is the highly stretched working capital cycle. “Thus considering the above observations, we assign a “subscribe with caution” rating for the issue,” the report stated.