Specialty chemical manufacturer Aether Industries’ initial public offering (IPO) opens for subscription today (24 May), and will close on Thursday. With a price band fixed at Rs 610-642 per share, the company plans to raise Rs 808.04 crore via the IPO. The IPO consists of a fresh issue of equity shares aggregating to Rs 627 crore and an offer for sale (OFS) of up to 2,820,000 equity shares. Ahead of the initial share sale, the company raised around Rs 240 crore from anchor investors. It has allocated a total of 37,42,495 equity shares to anchor investors at Rs 642 per share, taking the transaction size to Rs 240.26 crore.
Aether Industries IPO details
Price Band: Rs 610-642
Face Value: Rs 10
Market Lot: 23 shares
Minimum Lot: 1 Lot
Offer for Sale: 22%
Fresh Issue: 78%
Issue Size (Amt): Rs 808 crore
Issue Size (Shares): 12,586,355
QIB Share: ≤ 50%
Non-Inst Share: ≥ 15%
Retail Share ≥ 35%
Pre issue sh (nos): 114,716,318
Post issue sh (nos): 124,482,673
Aether Industries IPO Grey market premium
Shares of Aether Industries were trading at Rs 10 premium to its upper price band in the grey market on Tuesday. Once listed, Aether will join its peers like Clean Science and Technology, Navin Fluorine International, Vinati Organics, PI Industries, and Fine Organic Industries. Post the IPO, Aether will be listed on BSE and NSE.
Should you subscribe to Aether Industries IPO?
Choice Broking: Subscribe with Caution
Of the fresh issue net proceeds, Rs 163 crore will be used to fund the proposed greenfield expansion; Rs 137.9 crore will be utilized for repayment/prepayment of the borrowings and rest Rs 165 crore will be used to fund the working capital requirement of the company. “At higher price band of Rs 642, Aether is demanding an EV/Sales multiple of 13.1x, which is in-line to peer average of 15.2x. Considering its dominant position in the select specialty chemicals and growth prospects from the end use applications, we feel the company has buoyant outlook. However, a stretched valuation is a concern. Thus we assign a “Subscribe with Caution” rating for the issue,” the brokerage said.
Ventura Securities: Subscribe
“At the IPO price of Rs 642, AETHER is valued at 32.2X FY24 P/E. 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 with a price target of Rs 797, which represents an upside of 24% over the IPO price in 18 months,” the brokerage firm said in its IPO note.
Angel One: Subscribe
“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 AIL’s historical top-line & bottom-line CAGR of ~50% and ~75% respectively over FY19-21. Further, AIL has diversified customer base, strong financial track record and higher ROE. Considering all the positive factors, we believe this valuation is at reasonable levels. Thus, we recommend a subscribe rating on the issue,” the brokerage firm said in its note.
Religare Broking: Neutral
The brokerage firm believes that the company is well-placed to benefit from growing industry trends given its differentiated portfolio of market-leading products. A constant focus on research and development (R&D) and long-standing diversified customer base will help the company outperform industry growth. Analysts believe that the Indian specialty chemicals market is expected to grow at 11.2 per cent CAGR over CY20-25. Given this, the company is primed to benefit from its product portfolio expansion and diversification in other business segments. However, despite a strong financial performance, valuations appear expensive at ~71x FY22 annualized post EPS. Volatile raw material prices and high debt level continue to shadow the company’s performance; hence, the brokerage firm recommended a ‘neutral’ stance on the IPO.
(The recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)