Aeroflex Industries IPO Fully Subscribed Within First Hour
Aeroflex Industries, a subsidiary of SAT Industries, has opened its initial public offering (IPO) for subscription. The IPO consists of a fresh issue of shares worth Rs 162 crore and an offer-for-sale component with promoters and shareholders offloading shares worth Rs 189 crore.
The price band for the IPO is set at Rs 102-108 per equity share. The grey market premium for Aeroflex Industries shares has gained 63%, implying a listing price of Rs 176 per share.
The IPO was fully subscribed within the first hour of opening, with retail investors and non-institutional investors bidding 1.46 times and 1.31 times for their portion, respectively.
The IPO will close for subscription on August 24, with the allotment of units projected to be on August 29 and listing on the stock exchanges on September 1.
Aeroflex Industries manufactures and supplies environment-friendly metallic flexible flow solution products, such as hoses, tubes, and hose assemblies.
The company’s clients include distributors, fabricators, maintenance repair and operations companies, original equipment manufacturers, and companies in various industries.
The company has recently started manufacturing products made of bronze. Its products replace flow solutions made of rubber and polymers, with flexible flow solutions made with stainless steel corrugation becoming a preferred choice due to their advantages. The company has over 1,700 products in its portfolio.
Aeroflex Industries has a three-year average return on equity of 22.9% and return on capital employed of 28.4%. Its cash flow from operations has been volatile in the last three financial years.
The company’s topline has grown by 11.9% and 66.3% in FY23 and FY22, respectively, driven by higher demand for stainless steel hoses.
The increasing preference for stainless steel products over rubber and polymer is expected to drive further growth. Post-IPO, the stock will be priced at a P/E of 46.3 and P/B of 5.1 times.
However, there are no other listed companies in similar operations. The company operates in a highly fragmented market and faces competition domestically and internationally. Its high trade receivables should be monitored, as they accounted for around 25% of revenue in FY23.
Incorporated in 1993, Aeroflex Industries is a leading manufacturer and supplier of metallic flexible flow solution products with applications in various industries.
The company’s products have quality approvals at both the customer and regulatory authority levels, acting as a barrier to entry for new players.
However, fluctuations in foreign exchange rates can significantly impact its operations, as more than 80% of revenue comes from international markets. Trade receivables have accounted for around 23% of revenue on average in the last 3 years.