Aether IPO: Aether Industries IPO starting today: What should you subscribe to?

NEW DELHI: Special chemical maker Ether Industries on Tuesday launched its initial public offering (IPO) for public bidding. Most analysts are happy with the company’s prospects and suggest subscribing to the issue.

Overall, the company plans to raise a little over Rs 808 crore through the initial route. However, the size of the new equity block has been slashed from Rs 757 crore, following its pre-IPO placement plan.

The issue includes issue of new equity shares worth Rs 627 crore and offer for sale (OFS) of 28.2 lakh equity shares up to Rs 181.04 crore by existing shareholders and promoters.

The price band for the sale of shares has been fixed at Rs 610-642. Bidders for the issue will be able to apply for 23 or more shares.

Analysts at Ventura Securities say the IPO is priced at Rs 642, while the Aether is priced at 32.2X FY24 P / E.

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“Pharma, Agrochemicals and FMCG consider the opportunity to grow specialty chemicals in the space and to improve the prospects for contract manufacturing and CRAMS under the Make-in-India initiative, we recommend a subscription rating,” they say.

The broker has already set a price target of Rs 797 for the stock, which represents a rise of 24 per cent over the 18-month IPO price.

Aether Industries focuses on advanced intermediate and specialized chemical production involving complex and varied chemicals and technologies. The company’s products find application in various fields such as pharmaceuticals, agrochemicals, specialties, electronic chemicals, material sciences, high-performance photography, etc.

Proceeds from the new issue will be used to fund capital expenditure requirements, loan repayments and working capital requirements for the proposed Greenfield project in Surat, Gujarat.

Amarjit S Maurya of Angel One says in terms of evaluation, the post-issue TTM P / E works at 75.6x (the upper end of the issue price band), which is reasonable considering its historical top-line and bottom-line. The CAGR at FY19-21 is 50 percent and 75 percent, respectively.

“It has a diverse customer base, strong financial track record and high ROE. Considering all the positive factors, we believe that this assessment is at a reasonable stage. As such, we recommend subscribing ratings to the issue, ”Maurya said.

According to analysts, the main positive aspects that can work for the company include:

  • Different portfolio of market-leading products
  • Focus on R&D to leverage key chemistry and technology skills
  • Strong and lasting relationship with diverse customer base
  • Synergistic business models focus on large-scale manufacturing, CRAMS and contract manufacturing.
  • Experienced evangelist and senior management with extensive domain knowledge

Key concerns that could derail a company’s growth are:

  • The business is dependent on production facilities and any shutdown or slowdown in manufacturing activities can adversely affect the company.
  • Currently, it generates the most revenue from the top 20 customers (73 percent) without a long-term contract with all of them.
  • Non-compliance and change of regulations may adversely affect its business.

The issue will close on Thursday, May 26th.

(Disclaimer: The recommendations, suggestions, opinions and opinions offered by the experts are their own. These do not represent the views of the Economic Times)

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