Aether Industries IPO : 7 things to know about
Aether Industries Ltd, a leading specialty chemicals company, has already filed the draft red herring prospectus (DRHP) with SEBI for its proposed IPO of Rs.1,000 crore IPO. The IPO will be a combination of a fresh issue and an offer for sale (OFS).
The company is involved in advanced chemical intermediates which is an area where India already has a niche advantage and with the supply chain constraints created by China during the pandemic, many of the global procurers of specialty chemicals have been looking at India as an alternative location to source specialty chemicals. This should work in favour of Aether Industries Ltd.
7 important things to know about Aether Industries IPO
1) Aether Industries Ltd has filed for a Rs.1,000 crore IPO with SEBI which comprises of a fresh issue of Rs.757 crore and an offer for sale of OFS of Rs.243 crore approximately. Aether Industries Ltd is one of the largest manufacturer and supplier of specialty chemicals and it caters to markets in India and abroad.
Aether Industries Ltd focuses on producing advanced intermediates and specialty chemicals that involve complex and differentiated chemistry. This enables the company to create a niche for itself and reduce the entry barriers.
2) While the IPO pricing is yet to be announced, let us look at the offer for sale (OFS) component first. The company plans to offer 27.51 lakh equity shares as part of the OFS to the public as part of the IPO. The OFS being a transfer of ownership will not result in any equity dilution nor any EPS dilution.
Instead, the company will only see a reduction in promoter holdings and an increase in public holdings. As a result, the company will witness an increase in the free float of the stock, which will help in the listing.
3) The fresh issue portion will be worth about Rs.757 crore of Aether Industries IPO. Out of the fresh issue component of Rs.757 crore, the company has set aside a sum of Rs.136 crore for bank rolling its capital expenditure programs, Rs.212 crore for repaying the debt of the company while Rs.165 crore will be allocated to fund the working capital expenses of the company.
Meanwhile, the company is also planning a pre-IPO placement of Rs.131 crore. If the placement to HNIs, family offices and QIBs is successful, then the size of the fresh issue will be reduced proportionately.
The pre-IPO placement is done ahead of the IPO so as to give a good price guide to the stock. The pre-IPO placement comes with a longer lock-in than an anchor investment but the pricing leeway is also higher.
4) The company’s financials have been quite robust. For the fiscal year FY21, the company reported Rs.454 crore of sales revenues which has more than doubled over the last 2 years showing strong growth traction for the company in terms of top line.
At the same time, reported net profits of Rs.72 crore for the FY21, up nearly 3 times over FY19, which also gives a boost to the net profit margins. The EBITDA of the company has also gone up more than 2.5 times over the last 2 years showing good top line and bottom line traction. This should be positive for the stock valuations.
5) The company, Aether Industries Ltd, started off as a R&D unit in 2013 and got into commercial production only in the year 2017. It caters to many of the high growth industry sectors like pharmaceuticals, agrochemicals, material science, electronic chemical, high performance photography and the oil and gas industry in India.
6) Aether Industries Ltd has recently raised Rs.100 crore from early investors like White Oak Capital and IIFL in a pre-IPO round. White Oak is an investment fund founded by Prashant Khemka, who was formerly the head of Goldman Sachs India. The fund management business of White Oak is handled by Aashish Somaiya. Both are veterans in the field of investment.
7) The IPO of Aether Industries Ltd will be lead managed by HDFC Bank and Kotak Mahindra Capital Company. They will act as the book running lead managers or BRLMs to the issue.
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