Highlights
| Issue Size – 32,500,000 shares | Issue Open/Close – Aug 22 / Aug 24, 2023 |
| Price Band (Rs.) 102-108 | Issue Size- Rs 3,510 mn |
| Face Value (Rs) 2 | Lot Size (shares) 130 |
Aeroflex Industries Ltd (AIL), a subsidiary of SAT Industries manufactures and supplies environment-friendly metallic flexible flow solution products like multiple varieties of hoses, tubes and hose assemblies. The company’s clientele includes distributors, fabricators, maintenance repair and operations companies (MROs), original equipment manufacturers (OEMs), and companies operating in a wide range of industries. Moreover, the company has recently forayed into manufacturing products made of bronze.
The company’s products replace flow solutions made of rubber and polymers. Flexible flow solutions play a critical role in the transfer of substances (air, liquid and solid) in any industrial or commercial ecosystem, connecting the origin and end points of various processes. For example, flow solution products are required in fire sprinklers, gas supply, the flow of air (conditioned/controlled) in aircraft, fueling and hydraulics in aircraft.
The company’s customizable solutions and assembly capabilities access the flexible flow solutions value chain. The manufacturing site in Taloja, Navi Mumbai, covers around 3.6 lakh sq. ft.
Utilization of Proceeds- Rs. 320 mn from the proceeds will utilize for the repayment of the debt. After debt repayment, the company becomes debt-free, reducing finance costs. Rs 840 mn allocated to working capital, remaining fresh issue funds for corporate use and acquisitions.
Key Highlights
- Diversified Product Portfolio – The company’s product list includes braided hoses, unbraided hoses, solar hoses, gas hoses, vacuum hoses, braiding, interlock hoses, hose assemblies, lancing hose assemblies, jacketed hose assemblies, exhaust connectors, exhaust gas recirculation (EGR) tubes, expansion bellows, compensators, and related end fittings. As on Mar’23, the company recorded more than 1,700 Product SKUs (Stock Keeping Units) in its product portfolio. The company exports its products to 80+ countries including Europe, the USA and others. It supplies products to various industries for controlled substance flow, covering air, liquids, and solids.
- Export-oriented business model – The company derives 81 pct of revenue from export and 19 pct revenue from the domestic market. The top 5 customers contribute 24.10 pct of revenue as on 31st March 2023. The Company has exported their products to 47 countries. Over time, it gained a notable global presence by offering specialized stainless steel flexible flow solutions across various industries. AIL’s capabilities to manufacture a diverse range of products along with quality consistency have been key in establishing global markets. To serve the export markets better and real-time basis, the Company has incorporated a wholly-owned subsidiary in the United Kingdom (UK) in the name of “Aeroflex Industries Limited” in 2019. The Company has also appointed exclusive distributors in the United States and Brazil.
- Aeroflex Industries Ltd is the manufacturer of metallic flexible flow solutions in the country (Make-in-India, Make-For-World) with an installed capacity of 11 million meters per annum. The Company’s manufacturing facility, located at Taloja, Navi Mumbai, Maharashtra, is spread across 3,59,528 square feet of area and is equipped with mechanical and hydraulic corrugation machines, interlocking machines, braiding machines, bobbin machines and assemblies equipment’s capable to manufacture a range of customized hoses, braiding, assemblies and fittings. It also has 34 mechanical corrugation machines, 20 hydraulic corrugation machines, 4 interlocking machines and 28 braiding machines.
- AIL Expanding solutions portfolio with advanced assemblies and multi-material offerings is expected to boost operational margins.
- AIL intends to continue to improve its operational efficiencies using a variety of technology and digitization-led tools and techniques. It also intends to automate various processes to improve energy usage efficiency, eliminate waste, improve productivity and manpower optimization, further improvise water discharge practices, and continually work on cost reduction including applying various techniques to its products to reduce cost.
- There are no listed domestic peers as of now in the market identified by Aeroflex Industries Ltd, but the company identified international peers named Parker Hannifin Corporation (USA) and Senior PLC (UK).
- Company provides their Products in the Solar, Aerospace, Electric Vehicle Industry and Chemical Industries where margins are high. The company receives a majority of its sales from the steel industry (28 pct), Oil and Gas Industry (19 pct), Refineries (16 pct), Fire Sprinklers & Fire Fighting (16 pct), Chemicals and Petrochemicals (15 pct) as of 31st March 2023.
- The company’s domestic client includes IOCL, BPCL, ONGC, RIL, Tata Steel, JSW Steel, SAIL, HAL, ISRO etc. Apart from that company has international clients namely Victaulic USA etc.
Valuation
At the offer price bands, the issue is quoting at 42x P/E, 26.6x EV/EBITDA and 5.3x EV/Sales on FY23 financials. Due to its diverse products, robust finances, global presence, and growth plans, we recommend subscribing to the issue.
Also read: 6 Strategies To Reduce Investment Risks
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.