Subscribe with Caution to Aether Industries: Choice Equity Broking

Choice Equity Broking has come out with its report on Aether Industries. The research firm has recommended to ''Subscribe with Caution'' the ipo in its research report as on May 23, 2022.

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May 24, 2022 / 10:11 AM IST

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Choice Equity Broking IPO report on Aether Industries

Specialty chemical manufacturer, Aether Industries Ltd. (Aether), is coming up with an IPO to raise around Rs. 800cr, which opens on 24th May and closes on 26th May 2022. The price band is Rs. 610 - 642 per share. • The company has executed a pre-IPO placement on 5 th May 2022, and allotted 0.202cr share at Rs. 642 per share. Total amount collected from the pre-IPO placement was Rs. 130cr. Consequently, it has reduced the fresh issue size from Rs. 757cr (as mentioned in DRHP) to current Rs. 627cr. • The IPO is a combination of fresh issue and OFS portion. The company will not receive any proceeds from the OFS portion. Of the fresh issue net proceeds, Rs. 163cr will be used to fund the proposed greenfield expansion; Rs. 137.9cr will be utilized for repayment/prepayment of the borrowings and rest Rs. 165cr will be used to fund the working capital requirement of the company.

Valuation and Outlook

At higher price band of Rs. 642, Aether is demanding an EV/Sales multiple of 13.1x, which is in-line to peer average of 15.2x. Considering its dominant position in the select specialty chemicals and growth prospects from the end use applications, we feel the company has buoyant outlook. However, a stretched valuation is a concern. Thus we assign a “Subscribe with Caution” rating for the issue.

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