Aeroflex Industries IPO open today: Is Ashish Kacholia-backed player right fit for your portfolio?

The Rs 351-crore initial public offering (IPO) of Aeroflex Industries kicks off for subscription on Tuesday as the company will be selling its shares in the range of Rs 102-108 apiece with a lot size of 130 equity shares. The issue is open for bidding till Thursday, August 24.

The issue includes a sale of fresh equity shares worth Rs 162 crore, while its promoter Sat Industries will offload 1.75 crore equity shares amounting to Rs 189 crore through the offer-for-sale (OFS) route. The proceeds from fresh issue will be utilized for debt reduction, inorganic growth, funding its working capital requirements, and general corporate purposes.

Incorporated in 1993, Aeroflex Industries manufactures and supplies environment-friendly metallic flexible flow solution products. These solutions replace rubber and polymer pipes and tubes and its products have multi-purpose use and cater to numerous industry segments including fire-fighting, aviation, and space to name a few.

In multiple pre-IPO rounds, marquee investors of Dalal Street including Ashish Kacholia, Jagdish Master, Vikas Khemani-led Carnelian Fund and others picked up around 7 per cent stake in Aeroflex Industries. The company has no listed peers in the segment and enjoys a virtual monopoly in the business.

Navi Mumbai based Aeroflex Industries exports India-made metallic flexible flow solutions to more than 85 countries and derives about 80 per cent of its total revenue from overseas selling. The company was formerly known as Suyog Intermediates.

A day before its IPO, Aeroflex Industries mopped up Rs 103.68 crore from 15 anchor investors by allocating them 95,99,980 equity shares at a price of Rs 108 apiece, said a BSE circular. Nippon Life, Invesco, Winro Commercial India, Whiteoak Capital, Bank of India Mutual Fund, Quantum State Investment Fund, Societe Generale and Universal Sompo participated in the anchor book.

Watch: Ashish Kacholia-backed Aeroflex Industries' IPO oversubscribed within an hour of opening; GMP rises; should you apply or not? See what brokerages say

The company has reserved 50 per cent of the offer for qualified institutional investors (QIBs), while 15 per cent of shares will be offered to the non-institutional investors (NIIs). Retail investors will get the remaining 35 per cent of the net offer.

Pantomath Capital Advisors is the sole manager to the issue, while Link Intime India has been appointed as the registrar to the issue. The company will be listed on both BSE and NSE, with September 1 as the tentative date of listing.

Majority of the brokerage firms are positive on the issue and have suggested to 'subscribe' for it citing its unique business model, nearly monopoly status, global footprints, strong financials, decent margins and fair pricing. However, a high dependence on exports and select clients pose a threat to the company, they highlighted as the key risks. Here's what brokerage said about the issue:

Anand Rathi Shares & Stock Brokers
Rating: Subscribe for long term
Aeroflex Industries is a global flexible flow solutions provider operating in addressable market, catering to diverse industry segments with Export oriented business model and primary manufacturer of flexible flow solutions. The company has a 'make in India' model with no listed peers with advanced manufacturing facilities and R&D infrastructure, said Anand Rathi.

"At the upper price band, the company is valuing at P/E of 46 times FY23 earnings with a market cap of Rs 1,396.6 croee post issue of equity shares and return on capital employed of 31.91 per cent. We believe that issue is fairly priced and recommend 'subscribe-
long term' rating to the IPO," it added.

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Reliance Securities
Rating: Subscribe
On FY23 financials, the IPO is valued at 42 times P/E, 26.6 times EV/EBITDA and 5.3 times EV/Sales.  The company is likely to benefit from growth prospects in traditional industrial segments like manufacturing, automotive, oil & gas among others as well as emerging industries like solar, lithium-Ion battery management and robotics among others, said Reliance Securities.

"A strong track record of commercializing and scaling up new products and R&D capabilities puts the company in a good position to capture the requirements of diverse end user industrial sectors. In view of diversified product portfolio, strong financials, global footprint, focus on expanding its capacities, products and R&D capabilities," it added with a subscribe rating to the issue.

SBI Securities
Rating: Subscribe for long term
The company is valued at a PE multiple of 46.3 times based on its FY23 earnings at the upper price band on post-issue capital. The
company doesn't have any listed peers in India. The company has a unique business model. With decent return ratios and margins, the risk reward ratio for long term investors looks favourable, said SBI Securities with 'subscribe for long term' tag.

AUM Capital
Rating: Subscribe for long term
Aeroflex Industries has exhibited impressive financial growth and established strong client relationships, holding a dominant market position in India. With the support of seasoned promoters, prominent HNI investors, and a forward looking strategy, It is excellently poised for enduring success within the burgeoning Flexible Flow Solutions sector, said AUM Capital with a 'subscribe for long term'.

Swastika Investmart
Rating: Subscribe
Aeroflex is a well-established company with strong financial growth, and it enjoys a monopoly in its business as there are high barriers to entry. The company currently has no listed peers. It has an export-oriented business model, and it generates around 80 per cent of its revenue from exports. Despite some concerns, Aeroflex's future strategies look promising, said Swastika.

"The company plans to expand its global and domestic businesses, and it is investing in new technologies to improve its products. We believe that these strategies have the potential to drive long-term growth and profitability for the company. Overall, we believe that the Aeroflex Industries Limited IPO is a good investment opportunity," it added with a subscribe rating.

Hensex Securities
Rating: Subscribe
Aeroflex has an export-oriented business Model. They have exported their products to 51 countries and caters to players in various industries, their diversified customer base comprises distributors, fabricators, MROs and companies operating in a wide range of industries. It has a high entry barrier, said Hensex Securities with a subscribe rating on the issue.

ProfitMart
Rating: Subscribe
The brokerage is positive on Aeroflex for the long term as both globally and India's flexible flow solutions market offers a massive runway for growth over the next 3-5 years ahead. More importantly, the company enjoys marquee customers which makes its positioning very strong and will help it scale up its operations going ahead, said ProfitMart.

"The management team's combined expertise and experience are also a significant asset going ahead. We are confident that Aeroflex Industries will deliver consistent performance and provide an excellent investment opportunity for investors with a long-term horizon," it added with a subscribe for long term rating on the issue.

Asit C Mehta Investment Interrmediates (ACMIL)
Rating: Subscribe
Based on the growth achieved in Q1FY24, orders in hand and capex plans, Aeroflex is estimated to achieve revenue in the range of Rs 380-400 crore in FY24. Aeroflex is attractively valued in the range of 18-22 times of FY24P PAT and leaves on table, sufficient
upside potential for investors, said ACMIL with a 'subscribe' rating.


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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