What you must know about Aztec Fluids and Machinery IPO?

About Aztec Fluids and Machinery Ltd

Aztec Fluids and Machinery Ltd was incorporated in the year 2010  to manufacture an assortment of printers, printer consumables, printer spares etc. It caters to a wide range of sectors like personal care, food & beverages, pharmaceuticals, construction materials, metals, automotive, electronics, and chemicals. It has a wide product basket which includes continuous inkjet printers, Thermal Transfer Over printers, Drop on demand printers, NIJ printers, and laser printers. In addition to the regular printing consumables, Aztec Fluids and Machinery Ltd  also offers cleaning solvents as part of its products portfolio. The company is based out of Gujarat and it also has a warehouse in Kheda District near Ahmedabad for storage of imported printers. Aztec Fluids and Machinery Ltd principally exports to Sri Lanka, Nepal, Bhutan, Bangladesh, Kenya, and Nigeria.

Highlights of the Aztec Fluids and Machinery Ltd (BSE SME IPO)

Here are some of the highlights of the Aztec Fluids and Machinery IPO on the SME segment of the Bombay Stock Exchange (BSE).

• The issue opens for subscription on 10th May 2024 and closes for subscription on 14th May 2024; both days inclusive.
   
• The stock of the company has a face value of ₹10 per share and it is a book built issue. The book building price band has been set in the range of ₹63 to ₹67 per share. The final price of the IPO will be discovered in this range.
   
• The IPO of Aztec Fluids and Machinery Ltd has only a fresh issue component and no offer for sale (OFS) portion. While the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the IPO, Aztec Fluids and Machinery Ltd will issue a total of 36,00,000 shares (36.00 lakh shares), which at the upper IPO band price of ₹67 per share aggregates to fresh fund raising of ₹24.12 crore.
   
• Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the overall IPO size will also comprise of the issue of 36,00,000 shares (36.00 lakh shares approximately) which at the upper IPO band price of ₹67 per share will aggregate to overall IPO size of ₹24.12 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 1,82,000 shares. Hem Finlease Private Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Pulin Vaidya, Amisha Vaidya and Kumud Chandra Vaidya. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 73.53%.
   
• The fresh issue funds will be used by the company towards funding of the proposed acquisition of Jet Inks Private Ltd and for repayment of certain borrowings of the company. Part of the funds will also be used for general corporate purposes.
   
• Hem Securities Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Hem Finlease Private Ltd.

The IPO of Aztec Fluids and Machinery Ltd will be listed on the SME IPO segment of the BSE.

Aztec Fluids and Machinery IPO – Key Dates

The BSE SME IPO of Aztec Fluids and Machinery Ltd IPO opens on Friday, 10th May 2024 and closes on Tuesday, 14th May 2024. The Aztec Fluids and Machinery Ltd IPO bid date is from 10th May 2024 at 10.00 AM to 14th May 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 14th May 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on May 16th 2024, will be visible to investors under the ISIN Code – (INE0SCB01016). This allocation to the demat account is only applicable to the extent of the allocation of shares and if no allocations are made in the IPO, then no credit would be visible in the demat account.

IPO allocation and minimum investment lot size

Aztec Fluids and Machinery Ltd has already announced the market maker allocation at 58,000 shares as inventory for market making. Rikhav Securities Ltd will be the market maker for the IPO. The breakdown of the overall IPO of Aztec Fluids and Machinery Ltd in terms of allocation to various categories are captured in the table below.

Source: Company RHP

The minimum lot size for the IPO investment will be 2,000 shares. Thus, retail investors can invest a minimum of ₹134,000 (2,000 x ₹67 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 4,000 shares and having a minimum lot value of ₹268,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Financial highlights: Aztec Fluids and Machinery Ltd

The table below captures the key financials of Aztec Fluids and Machinery Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI

For the latest year, Aztec Fluids and Machinery Ltd has reported very strong numbers with sales growth consistent in the last 2 years. The PAT margins stand at 6.03%, and it has been in that range for last 3 year. In the retailing business, margins are generally narrow and must fit into the IRR of the buyer. while the ROE at 21.32% and the ROA at 10.59% are also fairly attractive, they are likely to be diluted. However, the asset turnover ratio or the sweating ratio is quite robust for the company.

The company has latest year EPS of ₹3.27 and we have not included the weighted  average EPS, since the previous year data is not exactly comparable. The latest year earnings are being discounted by the IPO price of ₹67 per share at 20.49 times P/E ratio. That is quite expensive for a business where net margins are likely to be thin. However, if one looks at the 9-months EPS for FY24 at ₹4.51, it translates into full year extrapolated EPS of ₹6.01 per share. That now makes the valuation relatively better at around 11-12 times P/E ratio. However, this company will be operating on a very thin PAT margin base and that has to be factored into calculations. Based on FY23 numbers, the stock does look expensive and investors should enter the stock either with a longer time frame or higher risk appetite.