Aether Industries IPO – Review and Analysis
About Aether Industries Limited
Company is a speciality chemical manufacturer in India.
It is focused on producing advanced intermediates and speciality chemicals involving completed and differentiated chemistry and technology core competencies.
Its business started in 2013 with a vision to create a niche in the global chemical industry with a creative approach towards chemistry, technology and system which would lead to sustainable growth.
They are focused on the core competency model of chemistry and technology.
According to Frost and Sullivan, chemical companies usually have a single or a couple of chemistry competencies for their entire product portfolio, however the company has eight chemistry competencies to use for its wide array of products. This enables them to cater to niche and advanced intermediate requirements of a wider range of end-products and applications.
Company has 2 manufacturing sites at Sachin in Surat, Gujarat. First manufacturing facility is a 3,500 square metre facility, including R&D and Hydrogenation Facilities and Pilot Plant. Second manufacturing facility encompasses roughly 10,500 square metres, with an installed capacity of 6,096 MT per year spread among three buildings and 16 production streams as of September 30, 2021.
What are the Objects of the IPO Offer?
Aether Industries IPO Size is Rs 808.04 Crores which has both OFS and fresh issue.
1) Offer for Sale (OFS) for Rs 181.04 Crores: Under OFS, selling shareholders would get entire money and the company would not get any funds.
2) Fresh issue of Rs 627 Crores: Fresh issue would be used for the following:
Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company.
Funding capital expenditure requirements for the manufacturing facility (Proposed Greenfield Project).
Funding working capital requirements of the company.
General corporate purposes.
Aether Industries IPO valuation
Aether Industries IPO price band is Rs 610 to 642 per share.
1) If we consider last 3 years weighted average EPS of Rs 5.51 and the upper price band of Rs 642, P/E works out to 116x.
3) Similarly, if we consider FY2021 EPS of Rs 7.36 and the upper price band of Rs 642, P/E works out to 87x.
4) If we take 9 months ended Dec-21 EPS and annualize it, the P/E works out to be 65x.
5) Means company is asking the upper price band of IPO price of Rs 642 in the P/E ratio of 65x to 116x.
As per the RHP, there are listed peers like Fine Organics trading at P/E 112x (Highest) and Navin Fluorine trading at P/E 74x (Lowest) and industry average P/E is 83x. Hence, Aether Industries IPO price of Rs 642 at P/E between 65x to 116x is fully priced.
Aether Industries IPO Review – Conclusion
Aether Industries Limited is the leading manufacturer of speciality chemicals in India.
Company has generated strong revenue growth in the last 3 years and 9 months.
It has generated strong margin growth too for a similar period.
Its issue price is fully priced.
Considering all these positive and risk factors, investors can invest in this IPO for medium to long term perspective. Since stock markets are taking corrections and recent IPOs have listed with negative gains, investors might not get listing gains even in this IPO.
About Aether Industries Limited
Company is a speciality chemical manufacturer in India.
It is focused on producing advanced intermediates and speciality chemicals involving completed and differentiated chemistry and technology core competencies.
Its business started in 2013 with a vision to create a niche in the global chemical industry with a creative approach towards chemistry, technology and system which would lead to sustainable growth.
They are focused on the core competency model of chemistry and technology.
According to Frost and Sullivan, chemical companies usually have a single or a couple of chemistry competencies for their entire product portfolio, however the company has eight chemistry competencies to use for its wide array of products. This enables them to cater to niche and advanced intermediate requirements of a wider range of end-products and applications.
Company has 2 manufacturing sites at Sachin in Surat, Gujarat. First manufacturing facility is a 3,500 square metre facility, including R&D and Hydrogenation Facilities and Pilot Plant. Second manufacturing facility encompasses roughly 10,500 square metres, with an installed capacity of 6,096 MT per year spread among three buildings and 16 production streams as of September 30, 2021.
What are the Objects of the IPO Offer?
Aether Industries IPO Size is Rs 808.04 Crores which has both OFS and fresh issue.
1) Offer for Sale (OFS) for Rs 181.04 Crores: Under OFS, selling shareholders would get entire money and the company would not get any funds.
2) Fresh issue of Rs 627 Crores: Fresh issue would be used for the following:
Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company.
Funding capital expenditure requirements for the manufacturing facility (Proposed Greenfield Project).
Funding working capital requirements of the company.
General corporate purposes.
Aether Industries IPO valuation
Aether Industries IPO price band is Rs 610 to 642 per share.
1) If we consider last 3 years weighted average EPS of Rs 5.51 and the upper price band of Rs 642, P/E works out to 116x.
3) Similarly, if we consider FY2021 EPS of Rs 7.36 and the upper price band of Rs 642, P/E works out to 87x.
4) If we take 9 months ended Dec-21 EPS and annualize it, the P/E works out to be 65x.
5) Means company is asking the upper price band of IPO price of Rs 642 in the P/E ratio of 65x to 116x.
As per the RHP, there are listed peers like Fine Organics trading at P/E 112x (Highest) and Navin Fluorine trading at P/E 74x (Lowest) and industry average P/E is 83x. Hence, Aether Industries IPO price of Rs 642 at P/E between 65x to 116x is fully priced.
Aether Industries IPO Review – Conclusion
Aether Industries Limited is the leading manufacturer of speciality chemicals in India.
Company has generated strong revenue growth in the last 3 years and 9 months.
It has generated strong margin growth too for a similar period.
Its issue price is fully priced.
Considering all these positive and risk factors, investors can invest in this IPO for medium to long term perspective. Since stock markets are taking corrections and recent IPOs have listed with negative gains, investors might not get listing gains even in this IPO.
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