Aeroflex Industries IPO Review – GMP, Price, Details & More

Aeroflex Industries IPO Review 2023: A Deep Dive into This Exciting Offering

About the Company

Aeroflex Industries previously known as Suyog Intermediates Private Limited was incorporated in 1993. The company manufactures and supplies environment-friendly metallic flexible flow solution products including braided hoses, unbraided hoses, solar hoses, gas hoses, interlock hoses, hose assemblies, vacuum hoses, braiding, lancing hose assemblies, jacketed hose assemblies, exhaust connectors, exhaust gas recirculation (EGR) tubes, expansion bellows, compensators and related end fittings collectively known as flexible flow solutions catering to global as well as domestic markets.

Industry Overview

The SS industry is experiencing good growth as a result of major drivers such as rising urbanization, which has boosted the pace of infrastructure development and real estate construction, which has sparked demand for HVAC systems and translated into a favourable prognosis for SS flexible hoses.

According to market research dated March 29, 2023, the global SS flexible hose market is predicted to be worth $25 billion in 2020, with the size of SS corrugated hose estimated to be $12.5 billion, which is expected to increase to $38 billion and $18 billion by 2027, respectively.

As the application of flexible flow solutions is spread across various segments across the globe, Aeroflex Industries believes that its growth is directly linked to the growth of traditional industrial segments and Emerging Industries.

The traditional industries include Automotive, Manufacturing, Oil & Gas (Exploring & Refineries), and HVAC among others. The Emerging Industries include Renewables (Solar), Semiconductor Manufacturing, Lithium-Ion Battery Management, and Robotics (Industrial robots & Drones) among others.

Financial Highlights

If we look at the financials of Aeroflex Industries Limited we find out that their assets have grown from ₹161.64 crores in March 2021 to ₹213.98 crores in March 2023.

Their revenues also follow a similar trend, it has grown from ₹144.84 crores in March 2021 to ₹269.48 crores in March 2022. Their profits have grown from ₹6.01 crores in March 2021 to ₹30.15 crores in March 2023.

This increase in revenue and net profit numbers is accompanied by an improvement in net profit margins from 4.15% in FY21 to 11.19% in FY23.

Coming to the return ratios, we can see that, it has an ROE of 26.43% and a RoCE of 31.91% as of FY23. This indicates a good return on the capital employed by the shareholders and the efficient use of company resources.

Over the past three years, the company has also reduced its Debt-to-equity ratio from 0.90 to 0.39. This indicates that the company primarily relies on its funds to run its business.

Competitors

As of the date of RHP of the company, there are no listed companies that can be compared with Aeroflex Industries. But new competitors including foreign-based companies and domestic producers who could enter the markets

Strengths of the Company

The company’s flexible flow solutions find applications in various industrial segments. The company believes that the growth of its business is directly linked to the growth in both traditional industrial segments and Emerging industries.

As for FY23, the company has supplied its products to 51 countries and has established a significant presence in the export markets by providing specified SS flexible flow solutions across industries.

Primary Manufacturer of flexible flow solutions having no listed peers with advanced manufacturing facilities and R&D infrastructure

The solutions provided by the company face strict quality standards from customers and regulators, making it hard for new players to enter the market.

Weaknesses of the Company

The company derives a majority of its revenue by exporting to other countries. Thus, the company needs to comply with the import duties or restrictions of the relevant jurisdictions imposed by these countries. An inability to comply with related requirements can adversely affect the business

The company does not have any long-term contracts with its suppliers and it is dependent on China for a significant portion of raw material suppliers. Any hindrance concerning the suppliers or the raw materials can negatively impact the business.

The company business is dependent on its single manufacturing facility and any slowdown or shutdown in the said facility will have an adverse effect on its operations.

As the company does not have any long-term contracts with most of its customers, it replies to purchase orders for delivery of the products. Due to this, the company is subject to order modifications, order cancellations, change in production quantities or change in sourcing strategies by the customers.

The company relies on third parties for the supply of raw materials and delivery of products. Any disruption in the supply and delivery of raw materials and finished goods could affect the company’s production and increase its costs.

Certainly, here’s the continuation:

Grey Market Premium (GMP)

The shares of Aeroflex Industries Limited traded at a premium of 57.41% in the grey market on August 17th, 2023. The shares traded at Rs 170. This gives it a premium of Rs 62 per share over the cap price of Rs 108.

Key IPO Information

IPO Size: ₹351.00 Cr
Fresh Issue: ₹162.00 Cr
Offer for Sale (OFS): ₹189.00 Cr
Opening date: August 22nd, 2023
Closing date: August 24th, 2023
Face Value: ₹2 per share
Price Band: ₹102 to ₹108 per share
Lot Size: 130 Shares
Minimum Lot Size: 1 (130 shares)
Maximum Lot Size: 14 (1820 shares)
Listing Date: September 1st, 2023

Promoters: Sat Industries Limited

Book Running Lead Manager: Pantomath Capital Advisors Private Limited

Registrar to the Offer: Link Intime India Private Limited

Objective of the Issue

The net proceeds from this issue will be utilized for the following purposes:

Complete or partial repayment and/or prepayment of certain outstanding secured borrowings availed by the Company
To Fund the working capital requirements of the Company
Unidentified Inorganic Acquisitions and General corporate purposes

In Closing

In this article, we examined the details of the Aeroflex Industries IPO Review 2023. Given the industry’s consistent expansion, coupled with the company’s own growth and absence of listed competitors, the company’s outlook appears favorable for the future.

What do you think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.