Overall, the company plans to raise little more than Rs 808 crore through the primary route. However, the size of the fresh equity block has been trimmed from Rs 757 crore earlier, following its pre-IPO placement plans.
The issue consists of the issuance of fresh equity shares of Rs 627 crore and offer for sale (OFS) of up to 28.2 lakh equity shares by existing shareholders and promoters aggregating to Rs 181.04 crore.
The price band for share sale has been fixed at Rs 610-642. The bidders for the issue can apply for shares in a lot of 23 and multiples thereof.
At the IPO price of Rs 642, Aether is valued at 32.2X FY24 P/E, said analysts at Ventura Securities.
“Considering the growth opportunities for speciality chemicals in pharma, agrochemicals & FMCG space, and improving prospects for contractual manufacturing & CRAMS under Make-in-India initiatives, we recommend a Subscribe rating,” they said.
The broker has already fixed a price target of Rs 797 for the stock, which represents an upside of 24 per cent over the IPO price in 18 months.
Aether Industries is focused on producing advanced intermediates and speciality chemicals involving complex and differentiated chemistry and technology. The products of the company find application in various sectors like Pharmaceuticals, Agrochemicals, Specialty, Electronic Chemicals, Material Sciences, High-Performance Photography etc.
Proceeds from the fresh issuance will be used to fund capital expenditure requirements for the proposed greenfield project in Surat, Gujarat, payment of debt and to fund working capital requirements.
Amarjeet S Maurya of Angel One said in terms of valuations, the post-issue TTM P/E works out to 75.6x (at the upper end of the issue price band), which is reasonable considering its historical top-line and bottom-line CAGR of 50 per cent and 75 per cent, respectively, over FY19-21.
“It has a diversified customer base, strong financial track record and higher ROE. Considering all the positive factors, we believe this valuation is at a reasonable level. Thus, we recommend a subscribe rating on the issue,” said Maurya.
According to analysts, among the key positives that may work for the company are:
- Differentiated portfolio of market-leading products
- Focus on R&D to leverage the core competencies of chemistry and technology
- Strong and long-standing relationships with diversified customer base
- Synergistic Business Models focused on Large Scale Manufacturing, CRAMS and Contract Manufacturing
- Experienced Promoters and Senior Management with extensive domain knowledge
Key concerns that may derail the company’s growth are:
- Business is dependent on manufacturing facilities and any shutdowns or slowdowns in manufacturing operations can have adverse effect on company
- Currently, it derives majority of its revenue from top 20 customers (73 per cent) without having any long-term contracts with all of them
- Non-Compliance and changes in regulations can adversely affect its business.
The issue will close on May 26, Thursday.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
