Aequs cites 'Western capacity constraints', China+1 tailwinds while launching IPO

Aequs aerospace industrial park in Belagavi, Karnataka.

Export-driven component manufacturer Aequs Limited is leaning on rising global demand for aerospace components and the push by customers to diversify away from China as it heads into the public markets with an offer structure dominated by debt repayment.

The company’s initial public offering, which opens on December 3, comprises a fresh issue of Rs 670 crore and an offer for sale (OFS) of over 2 crore shares. At the upper end of the price band, the OFS is roughly one fourth of the total issue, making the IPO a three-to-one mix of fresh capital versus shareholder exits.

Most of the fresh proceeds will go toward reducing borrowings, the management said during a pre-IPO press interaction.

Also, read: Aequs sets IPO price band at Rs 118-124 per share, Rs 922-crore issue to open on Dec 3: Check key details

Global manufacturing shifts

Aequs founder and CEO Aravind Melligeri highlighted how global dynamics are driving outsourcing to India. He said the company is benefiting from two parallel shifts in manufacturing.

First, on the aerospace side, large Western suppliers are struggling with labour shortages and post-pandemic retirements. Airbus, for instance, is moving from 52 to 75 aircraft a month on the A320 line and needs partners who can scale quickly.

“Customers are looking at us for solution capacity because the West is not able to meet their growth requirement,” Melligeri said while responding to a question on the debt concerns.

On the consumer side, he said multinational brands are reworking supply chains that were previously concentrated in China. Clients are now actively pushing a three-way diversification split across China, Vietnam and India.

The company supplies to toy makers and home appliances, through a joint venture with Tramontina.

Also, read: Aequs IPO grey market premium at 34% as subscription opens Wednesday

Long production timelines

Despite the demand visibility, Aequs continues to face long production and qualification cycles common in aerospace manufacturing.

Melligeri said qualifying a new part can take anywhere from six months to five years, while some materials must be ordered up to 36 months ahead of production.

He also highlighted uncertainty in metal sourcing, including titanium supplies affected by the Russia-Ukraine war.

Also, read: Meesho vs Aequs vs Vidya Wires IPO: Here's how the upcoming share sales stack up

Belagavi ecosystem advantage

The company is banking on its Belagavi Special Economic Zone, which Melligeri described as the only fully integrated aerospace ecosystem of its kind, to secure long term contracts and retain its position as a single source supplier on several Airbus programmes.

Meanwhile, executives from the company said Aequs now manufactures more than 5000 part numbers across major aircraft platforms.

Mixed performance across segments

While the aerospace segment is profitable, the consumer business has faced headwinds through FY25, mainly from slower toy demand.

Capacity utilisation stands at 44 percent, a result of recent additions in consumer electronics. Management expects this to improve in FY26.

The Valuation Picture

On valuation, Melligeri said pricing is for the market to determine. “Investors love what we do because it is not something that can be easily replicated. We have to execute, execute, execute,” he said.

At the upper end of the Rs 118-124 price band, the IPO values Aequs at roughly Rs 7,500 crore, with an enterprise value of about Rs 9,200 crore, translating to an EV-to-sales multiple of nearly 10 times FY25 revenue.

The multiple is similar to that of eyewear retailer Lenskart, which attracted considerable debate over its IPO valuation.

Balance sheet clean-up

With most of the fresh issue earmarked for loan repayment, Aequs is positioning the IPO as a balance sheet clean-up that will help support expansion in casting and deeper value addition across key aerospace parts.

The offer closes on December 5.