Aether Industries IPO Review

Aether Industries IPO plans to raise ₹ 808 crores during its IPO opening on 24th May and closing on 26th May 2022. The company has fixed the price band from ₹ 610 to ₹ 642 per equity share. The IPO is a combination of fresh issue and OFS portion with a fresh issue of Rs 627 crore and an offer for sale of up to 28.2 lakh shares by promoter Purnima Ashwin Desai. The Surat based Aether Industries Limited manufactures advanced intermediates and specialty chemicals that involve complex and differentiated chemistry and technology core competencies.

Bidding date24th May – 26th May 2022
Issue DetailsFresh Issue of Equity shares of ₹ 627 Cr and OFS of 2,820,000 Equity Shares.
Issue Size  (₹ Cr)₹ 799 – 808 Cr
Issue Size  (Shares)13,098,688 – 12,586,355
Face ValueRs. 10
Bid Lot23 Shares 
Price Band ₹ 610 – 642
Issue Structure :
QIB50%
NIB15%
Retail35%; 280.13 crore ; 280.13;  4,366,245 shares
Appl. for 1x Retail1.9  Lac

About Aether Industries

  • Aether Industries Limited was incorporated on 2013. However commercial operations commenced from FY17.
  • Aether is a specialty chemical manufacturer in India focused on producing advanced intermediates and speciality chemicals involving complex and differentiated chemistry and technology core competencies
  • Aether has three operating business segments:
    • large scale manufacturing of its own intermediates
    • specialty chemicals;
    • CRAMS and contract/exclusive manufacturing.
  • In FY21, these business verticals contributed 72.2%, 19.4% and 8%, respectively, to its revenuea.
  • As of March 31, 2022, Aether’s product portfolio comprised over 25 products. These were sold to over 34 global companies in 18 countries and to over 154 domestic companies.
  • Aether Industries is the sole manufacturer in India of 4-(2-Methoxyethyl) Phenol (4MEP), 3-Methoxy-2-Methylbenzoyl Chloride (MMBC), Thiophene-2-Ethanol (T2E), Ortho Tolyl Benzo Nitrile (OTBN), N-Octyl-D-Glucamine, Delta-Valerolactone and Bifenthrin Alcohol.
  • In 2020, Aether was also the the biggest manufacturer of 4MEP globally besides being the only manufacturer of this product in India;The same holds for other products like HEEP, NODG, T2E.
  • Aether Industries has two manufacturing sites at Sachin in Surat, Gujarat.
  • Aether’s CRAMS business clientele includes Adama Group, Altana AG, Aramco Performance Materials LLC, Austin Chemical Company, Inc., Avient Corporation, BYK Chemie GmbH, Connect Chemicals, Milliken & Co., Polaroid Film BV, and Tosoh FineChem Corporation.
  • Contract manufacturing clientele includes Adama Group, Altana AG, BYK Chemie GmbH, Divis Laboratories Ltd., Dr. Reddy’s Laboratories Ltd. , UPL Ltd. etc.

Anchor Book: Aether Industries IPO

Aether Industries raised Rs 240 crore from 13 anchor investors ahead of its IPO. A total of seven DIIs and six FPIs investors participated in the anchor book. This includes SBI Mutual Fund, Ashoka India Opportunities Fund (White Oak), The Nomura Trust, Goldman Sachs Funds, Axis Mutual Fund, Aditya Birla Mutual Fund, Kotak Mutual Fund, IDFC Mutual Fund, Tata Mutual Fund, Max Life Insurance in the anchor book along with FPI like IIFL UCAL, Allianz Global Investor, Amundi mutual funds.
Out of the total allocation 49% of the Total Anchor Book Size was allotted to mutual funds.

Salient Points

  • Promoter & promoter group 97% holding to drop to 87% post the IPO.
  • Of the fresh issue net proceeds, company will utilise Rs 163 crore for funding capital expenditure requirements for proposed Greenfield project; Rs 137.9 crore will be utilised for prepayment of outstanding borrowings and Rs 165 crore will be used for funding working capital requirements and general corporate purposes.
  • Aether Industries IPO size was trimmed with the cut in the size of the fresh issue of equity shares to ₹627 crore from ₹757 crore planned earlier following the pre-IPO placement.
  • Aether Industries raised Rs. 130 cr via pre-IPO placement at Rs. 642 per share on 5th May 2022. It had earlier raised Rs. 103 cr at the same price in Nov 2021 round.

Aether Industries IPO: Financials

Particulars / (₹ In Cr)2021(09) 2020(09) Fy21FY20Fy19
Reserves 247.59117.84164.2369.7229.99
Net worth as stated 360.28126.4174.3378.2838.55
Revenue from Operations 442.54334.09449.82301.81201.18
Revenue Growth (%) 32.46%– 49.04%50.02%– 
EBITDA as stated 125.9976.54112.1671.7647.51
EBITDA (%)28.47%22.91%24.93%23.78%23.61%
Net Profit for the period 82.9148.2571.1239.9623.34
Net Profit (% )18.45%14.30%15.67%13.15%11.48%
Equity Share Capital 112.698.5610.18.568.56
EPS-Basic & Diluted (₹ ) 7.45^ 5.12^ 7.364.242.48
NAV – Basic (₹ ) 20.8511.8115.698.314.09
Post IPO Equity in cr124.48
FV10
IPO Price642
EPS ( FY21)5.71
PE FY21112.37
EPS  annaulized (9m FY22)8.88
PE FY22 ann72.29
Market Cap in Rs. Cr. 7992
Market Cap / Sales 13.54

Concerns

  • Prices of some of raw materials that it uses are closely linked to crude oil prices.
  • The company’s operations involve the manufacture, usage and storage of hazardous substances.
  • It does not have long-term contracts with its major customers.

Aether Industries IPO: Assessment

  • Aether is one of the fastest growing specialty chemical companies in India, growing at a CAGR of 49.5% between 2019 and 2021.
  • Aether has 8 chemistry competencies to use for their wide array of products, which enables them to cater to niche and advanced intermediate requirements of a wider range of end-products and applications.
  • These competencies have been developed inhouse at Aether Industries, which is the core strength of their R&D team.
  • Aether Industries is undertaking Rs. 190 cr greenfield capex which will get commissioned by 2022 end. the installed capacity of 6,100 MTPA will rise by 4,000 MTPA. Company plans further capex for additional 4,500 MTPA capacity by 2023 end, taking total installed capacity to 14,600 MTPA.
  • Aether Industries shares are commanding a negligible single digit premium (GMP) in the grey market.
  • Aether Industrie IPO P/E works out to 76.
  • For FY2021, Aether Industries OPM and ROE stood at 24.9% and 40.8% respectively,
  • Aether Industries when compared with some of the top notch listed peers such as
    • Clean Science and Technology trades at TTM P/E of 78.7, OPM – 46.6%, ROE 45%
    • Fine Organic Industries trades at TTM P/E of 75, OPM – 16%, ROE 17.8%
    • Navin Fluorine International trades at TTM P/E of 66.4, OPM – 15.1%, ROE 24.4%
    • Vinati Organics trades at TTM P/E of 59.1, OPM – 26.9%, ROE 20.6%
    • PI Industries trades at TTM P/E of 51, OPM – 21.6%, ROE 14.7%
  • Investors need to keep in mind the current meltdown in many IPOs. I would avoid getting carried away with high growth prospects since the PE multiple being demanded is quite high especially in current market conditions.
  • While the company has posted sustained growth in both top and bottom line, there is very little space/margin of safety left for the investors.
  • Incase I apply at the last minute based on company’s track record & good prospects I will come under a high risk bet. This will also be based on QIB nos crossing 5-6x mark.
  • The company performance in past has been quite impressive with astonishing growth rates. The IPO would have attracted good attention if markets had not turned bearish.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

t

t

Leave a Reply