Aether Industries IPO - Information Note

Aether Industries IPO - Information Note

IPO
by 5paisa Research Team Last Updated: May 24, 2022, 04:21 PM IST

Aether Industries is a focused specialty chemicals company and it essentially operates along 3 operating business lines. The manufacture of intermediates and specialty chemicals caters to the institutional market comprising of agrochemicals and pharma companies. Secondly, the CRAMS business contracts research services and is a high growth segment in specialty chemicals.

Lastly, the Aether Industries is also into contract manufacturing on behalf of other manufacturers or for dedicated customers using dedicated capacity.

The manufacturing operations of Aether Industries are conducted through its two sites located near Surat in Gujarat. Aether has a rich product portfolio of over 25 products and its products and services reach out to over 34 institutional clients spread across 18 countries.

Aether also has a very strong domestic portfolio and caters to over 150 Indian companies. In India, Aether is the sole manufacturer of specialty chemicals like 4MEP, T2E, NODG and HEEP and also ranks among the largest producers in the world.
 

Aether Industries Ltd IPO – Key details of the offer
 

Particulars

Key IPO Details

Particulars

Key IPO Details

Nature of issue

Book Building

Issue Opens on

24-May-2022

Face value of share

Rs.10 per share

Issue Closes on

26-May-2022

IPO Price Band

Rs.610 - Rs.642

Basis of Allotment date

31-May-2022

Market Lot

23 shares

Refund Initiation date

01-Jun-2022

Retail Investment limit

13 Lots (299 shares)

Credit to Demat

02-Jun-2022

Retail limit - Value

Rs.191,958

IPO Listing date

03-May-2022

Fresh Issue Size

Rs.627.00crore

Fresh Issue (No. of shares)

97,66,355

Offer for Sale Size

Rs.181.04 crore

Offer for Sale (No. of shares)

28,20,000

Total IPO Size

Rs.808.04 crore

Indicative valuation

Rs.7,992 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

50%

Retail Quota

35%

(BRLMs) – HDFC Bank, Kotak Mahindra Capital (Registrar) – Link In Time India

 

Data Source: IPO Filings


3 important things to know about Aether Industries IPO


1. The original fresh issue amount was supposed to be Rs.757 crore but in March 2022, Aether raised Rs.130 crore via pre-IPO placement. Subsequently, the fresh issue size was reduced proportionately to Rs.627 crore.

2. The specialty chemicals space is seeing rapid growth in recent years and recent supply chain constraints created by China is also making more countries rely on India to supply their sources of supply of specialty chemicals. That has worked to India’s favour.

3. The fresh issue portion will be used to bankroll a proposed greenfield project of the company and also to partially repay or prepay its debt. A small part of the fresh issue proceeds will also be used for working capital and for general corporate purposes.
 

Capital issue structuring for the Aether Industries IPO

1. The Aether Industries IPO entails the issue of 1,25,86,355 shares in the price band of Rs.610 to Rs.642. Issue size at upper price band works out to Rs.808.04 crore.

2. The offer for sale (OFS) portion will entail the issue of 28,20,000 shares which at the upper price band of Rs.642 works out to a value of Rs.181.04 crore. 

3. The fresh issue component will entail the issue of 97,66,355 shares, which at the upper price band of Rs.642 works out to Rs.627 crore.

4. The company has also reserved up to 11,13,707 shares for preferential allotment to the employees of Aether Industries Ltd and only shares net of this will be issue to public.
 

Application options for retail investors in Aether Industries IPO


The investor lot is 23 shares and in multiples of lots of 23 shares thereof. Check the table for different investment options available to the retail investor.
 

Market Lot

Number of Shares

Price

Investment

1

23

₹ 642

₹ 14,766

2

46

₹ 642

₹ 29,532

3

69

₹ 642

₹ 44,298

4

92

₹ 642

₹ 59,064

5

115

₹ 642

₹ 73,830

6

138

₹ 642

₹ 88,596

7

161

₹ 642

₹ 1,03,362

8

184

₹ 642

₹ 1,18,128

9

207

₹ 642

₹ 1,32,894

10

230

₹ 642

₹ 1,47,660

11

253

₹ 642

₹ 1,62,426

12

276

₹ 642

₹ 1,77,192

13

299

₹ 642

₹ 1,91,958

 

In short, the retail investors can start with application of 1 lot of 23 shares and go all the way up to 13 lots (299 shares) worth Rs.191,958.
 

Aether Industries IPO – Key Financial Parameters
 

Financial Parameters

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Sales Revenues

Rs.453.79 cr

Rs.303.78 cr

Rs.203.28 cr

Total Assets

Rs.452.94 cr

Rs.300.47 cr

Rs.206.68 cr

Asset Turnover (X)

1.00

1.01

0.98

Net Profits

Rs.71.12 cr

Rs.39.96 cr

Rs.23.34 cr

Net Profit Margin (%)

15.67%

13.15%

11.48%

 

Data Source: Company RHP

The company has maintained steady state asset turnover even amidst rising asset base and a consistently growing net margin over the last 3 years. In the first nine months of FY22 ending in December 2021, Aether has reported net margins of 18.45%, a clear sign that the company has been building traction on the margin front. Of course, due to the substantial asset expansion, the asset turnover ratios could face headwinds in FY22.

Aether Industries IPO – How should investors approach the investment decision

While it is advisable to consult with your financial advisor before taking an IPO investment decision, here are some factors to consider ahead of the IPO issue.

a) In terms of business, the company has shown consistent growth in sales coupled with improvement in net profit margins of the company over the last 4 years.

b) Despite the sharp growth in assets, the company has kept its asset turnover over the last 3 years at around the unity market, although it could deteriorate in FY22.

c) The specialty chemicals business is a high growth business where niche players have strong global demand. That is likely to favour Aether Industries.

d) In terms of the indicative valuations even if you consider the FY22 annualized earnings, the IPO is still valuing the company at over 75 times earnings. That is quite steep by comparable standards in the market.

Aether Industries has the advantage consistent performance and sound financials, apart from a business model that promises robust demand outlook. However, the immediate headwind could be from valuations and the weak market sentiments. Investors should take a measured and calibrated decision on investing in the IPO.

Also Read:-

Upcoming IPOs in May 2022

List of Upcoming IPOs in 2022

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Disclaimer

Investment/Trading is subject to market risk, past performance doesn’t guarantee future performance. The risk of trading/investment loss in securities markets can be substantial. Also, the above report is compiled from data available on public platforms.
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