Unimech Aerospace eyes aggressive expansion with plans to double capacity

Unimech Aerospace's Rs 500 cr IPO fully subscribed

The public issue of aerospace and defence manufacturing firm Unimech Aerospace saw strong demand with the IPO getting fully subscribed within hours of its opening on December 23. Unimech, a manufacturer of precision-engineering components, aims to raise Rs 500 crore with a fresh issue component of Rs 250 crore.

Notable anchor investors like Goldman Sachs, Kotak Mahindra Life, ICICI Mutual Fund, Tata Mutual Fund, and others have committed Rs 149 crore through the anchor book.

In an interaction with Moneycontrol, Anil Kumar Puthan, Chairman and Managing Director, Unimech Aerospace shared the company’s vision and roadmap post the IPO.

Diverse Product Portfolio
Unimech Aerospace specialises in two distinct product categories: aerospace tooling, which involves high-complex tank assemblies, and precision components and subsystems, catering to the aerospace, defence, energy, and semiconductor industries.

“Our product portfolio is defined by high-value, low-volume production, serving an overall addressable market exceeding $250 billion,” said Puthan, highlighting the company’s focus on cutting-edge and niche offerings.

With over 90% of the revenue stemming from exports, Unimech caters primarily to clients in the United States, Germany, and the United Kingdom. This reliance on global markets aligns with the structure of the aerospace industry, where OEMs (Original Equipment Manufacturers) and Tier 1 suppliers are predominantly based in the Western world.

Expanding Horizons
The funds raised through the IPO are crucial for Unimech’s aggressive expansion strategy. Out of the Rs 250 crore fresh issue, a significant portion is allocated for capital expenditure, with investments planned in two phases.

“The first phase, already underway, involves acquiring advanced CNC machines, welding centers, and specialised processing units. It will be completed within the next few months,” Puthan explained. “The second phase, which is expected to conclude in 12-18 months, will follow similar lines.”

This expansion will effectively double Unimech’s capacity within six months.

Also Read: Unimech Aerospace and Manufacturing IPO: A niche engineering player with intriguing valuation

Diversifying Revenue Streams
Although aerospace tooling segment dominates Unimech’s revenue, the company is actively working to diversify. Precision components and subsystems, which presently contribute only 2% of revenue, are projected to account for 30% within four years, as per company's estimates.

In addition, the company is exploring opportunities in nuclear power, semiconductor technologies, and domestic defence programs. These efforts are part of Unimech's broader strategy to reduce reliance on aerospace exports and tap into domestic markets.

Puthan also revealed plans to establish a manufacturing base in the United States. “This will allow us to cater to larger assemblies and defence programs that face outsourcing restrictions in India, while also mitigating logistics costs,” he said.

Margin Trajectory
Unimech has demonstrated remarkable financial growth, with a revenue CAGR of 79% between FY22 and FY24. EBITDA margins reached 38% in FY24, a testament to the company’s focus on high-margin projects.

While Puthan acknowledged that margins might dip temporarily due to ongoing capital expenditure, he emphasised the company’s commitment to maintaining strong financial performance. “Our strategy involves rapid capacity enhancement, which aligns with our long-term growth objectives,” he said.

Concentration Risk
One potential challenge for Unimech lies in its client concentration. The company’s largest customer contributes 55-60% of its revenue, while the top five clients account for 95%.

However, Puthan downplayed this as a risk, citing the company’s long-standing relationships with major clients and its efforts to diversify. “We view this as a strength rather than a vulnerability, given the nature of the aerospace industry. Additionally, we are actively working to expand our customer base in new sectors like nuclear and energy,” he said.

Inorganic Growth Plans
In addition to organic expansion, Unimech is pursuing mergers and acquisitions in adjacent sectors, such as oil and gas. The company recently raised Rs 250 crore in pre-IPO funding, earmarked specifically for M&A activities.

“Our goal is to transition into high-mix, low-to-medium volume product lines, enabling us to strengthen our position in diverse industries,” Puthan said.

Competitive Landscape
Unimech enjoys a unique position in the aerospace tooling segment, where few players in India operate at a comparable scale. “We continue to dominate the market in India and are well-positioned against competitors in the precision components segment,” Puthan said.

On the demand front, Unimech remains optimistic, with no signs of a slowdown in its key markets. “Our order book for the next three to four months looks strong, supported by rising aircraft production and increased engine maintenance requirements,” he added.