Aether Industries IPO: All You Need To Know
Aether Industries IPO will open on May 24 and close on May 26.
Surat-based specialty chemicals maker Aether Industries Ltd. will launch its Rs 808-crore initial public offering on Tuesday amid a spike in global volatility on account of the Russia-Ukraine crisis, resurgence of Covid-19 cases in China and inflation pressures.
The company will issue fresh shares worth Rs 627 crore, according to its red herring prospectus. The IPO will also comprise an offer for sale of 28.20 lakh shares by the promoter group and other selling shareholders. That will fetch investors Rs 181 crore at the upper end of the price band of Rs 610-642 apiece. The issue together will comprise 10.11% of the post-issue equity capital.
Issue Details
Issue opens on: May 24.
Issue closes on: May 26.
Price band: Rs 610-642 apiece.
Issue size: Rs 808 crore.
Face value: Rs 10 apiece.
Lot size: 23 equity shares and multiples.
Listing on: BSE and NSE.
Lead managers: HDFC Bank, Kotak Mahindra Capital
Use of Proceeds
The company will use the proceeds from the fresh issue for:
Capital expenditure for a greenfield project: Rs 163 crore.
Pre-payment/repayment of borrowings: Rs 137.9 crore.
Working capital requirements: Rs 165 crore.
Business
Aether Industries focuses on producing advanced intermediates and specialty chemicals. It started building an R&D team in 2013 and started commercial operations in fiscal 2017. The company grew at an annualised rate of nearly 49.5% between 2019 and 2021.
As of March 31, its portfolio comprised over 25 products across eight chemistries. The company is into large-scale, contract and exclusive manufacturing for clients.
Aether Industries’ major customers are based out of the U.S., North America, Europe and India. Nearly 49% of its revenue comes from exports, which also acts as natural hedge against volatility in raw materials largely sourced from overseas.
Its key customers include Adama Ltd. of Israel, Altana AG and BYK Group of Germany, and India’s Dr. Reddy’s Laboratories Ltd., Divi’s Laboratories Ltd. and UPL Ltd. Its largest customer contributed 13.5% of its revenue in the nine months through December 2021. But the proportion of revenue exposure from this single client has been declining over the last few years as it diversified its customer base. Top 20 customers account for 72.9% of the revenue.
The company derives 62.6% of its top line from the pharma segment, 22.9% from agrochemicals, 4.25% from material sciences and 3.87% from high performance photo segment.
Financials
The company has grown at a CAGR of 49.5% between 2019 and 2021 fiscals. It reported an operating margin of 28.5% for nine months through December.
Peer Competition
Aether Industries competes with listed peers including Clean Science & Technology Ltd., Navin Fluorine International Ltd., Vinati Organics Ltd., PI Industries Ltd. and Fine Organics Ltd.
Risk Factors
Any slowdown or shutdown in manufacturing operations or strikes, work stoppages or increased wage demands by employees could interfere with operations.
Operations involve manufacture, usage and storage of hazardous substances.
The company derives a significant part of revenue from major customers. If one or more of such customers choose not to source their requirements from the company or terminate long-term contracts, then its business may be adversely affected.
Non-compliance with and changes in, safety, health, environmental and labour laws and other applicable regulations may adversely affect business. It the past, the company has failed to make a regulatory filing with the Ministry of Corporate Affairs in time.
Its inability to successfully implement some or all business strategies in a timely manner.
Inability to develop new products or continue product portfolio expansion in a cost-effective manner may impact its business.