Shares of Avalon Technologies opened with a 1.15 percent discount to the issue price on April 18, which was on expected lines, given subdued response from investors other than QIBs, high valuations in the competitive industry and volatility in equity markets.
The stock kicked off at Rs 431 on the BSE against an issue price of Rs 436 per share, while the listing price on the NSE was at par at Rs 436. Its market capitalisation at issue price was Rs 2,850 crore.
The Rs 865-crore maiden public issue of the electronic manufacturing services company had seen 2.21 times subscription during April 3-6, mainly aided by qualified institutional investors, which generally have a lock-in period of 30 days after listing of any IPO. QIBs have bought 3.57 times the allotted quota and majority of their subscription was seen on final day, while there was muted response from retail investors and high net worth individuals, who have subscribed 84 percent and 41 percent.
The price band for the offer was Rs 415-436 per share. This was the first IPO and second listing (after Udayshivakumar Infra) in the current financial year.
Avalon Technologies is a leading fully integrated electronic manufacturing services (EMS) company with end-to-end operations in delivering box build solutions in India, catering to multiple industries like industrial, mobility, medical devices, solar, EVs, hydrogen and digital communication and infrastructure, through 12 manufacturing facilities across India and USA. The 13th facility at Chennai is currently under construction.
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It provides a full stack product and solution suite, from printed circuit board (PCB) design and assembly to the manufacturing of complete electronic systems (box build).
Most brokerages had given a 'subscribe with a long term' rating for the issue given the long term benefits from the tailwinds of Aatmanirbhar Bharat and the production linked incentive (PLI) scheme across verticals, and currently at the IPO price, its valuations are a bit on the higher side compared to peers.
"The IPO, at the upper band of Rs 436, is valued at P/E multiple of 55.5x based on 8MFY23 annualised earnings on post issue capital. The IPO looks fairly priced across various valuation parameters when compared with its close peers. Investor can subscribe the issue for long term investment perspective," SBI Securities had said in its note.
Avalon has increased its key customer base over the time from 54 in FY20 to 89 in eight months to November 2022, including marquee names like Collins Aerospace, ATOS, and Cummins. As of November 2022, its order book was at Rs 1,190 crore, up 39 percent over FY22 closing order book.
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"Company being end – to – end integrated solutions, providing a “One Stop Shop” for electronics and electro – mechanical design and manufacturing services has high entry barriers to business. Company’s well-diversified business leading to strong growth avenues," Hem Securities said.
Along with established relationships with marquee customer base, company has global delivery footprint with high quality standards and advanced manufacturing and assembly capabilities, however, looking at the B2C market size as compared to B2B which company is into, valuation looks little bit on higher side, said Hem Securities. Hence, the brokerage had assigned 'long term subscribe' rating on the issue.
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