Aether Industries IPO - Information Note

5paisa Research Team 5paisa Research Team 11th December 2022 - 06:44 pm

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

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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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