Aether Industries Limited is a speciality chemical manufacturer in Bharat focused on producing advanced intermediates and speciality chemicals involving complex and differentiated chemistry and technology core competencies. The business was started in 2013 and is one of the fastest growing specialty chemical companies in Bharat, growing at a CAGR of nearly 49.5% between Fiscal 2019 and Fiscal 2021. Company is focused on the core competencies model of chemistry and technology. They have eight chemistry competencies to use for the wide array of products, which enables them to cater to niche and advanced intermediate requirements of a wider range of end-products and applications. All these competencies have been developed in-house, which is one of the core strengths of the R&D team. They have three business models under which they operate: (i) large scale manufacturing of the own intermediates and speciality chemicals; (ii) contract research and manufacturing services ('CRAMS') and (iii) contract/exclusive manufacturing. They developed, and continue to develop, advanced intermediates and speciality chemicals products having applications in the pharmaceutical, agrochemicals, material science, coatings, high performance photography, additives and oil & gas segments of the chemicals industry. As of March 31, 2022, the product portfolio comprised over 25 products. They were the sole manufacturer in Bharat of 4MEP, MMBC, T2E, OTBN, NODG, DVL and Bifenthrin Alcohol. In 2020, they were (i) the biggest manufacturer of 4MEP globally in terms of production volume and the only manufacturer of this product in Bharat, (ii) the largest manufacturer of HEEP in India and globally in terms of production volume, (iii) the largest manufacturer of NODG globally in terms of production volume and the only manufacturer of this product in Bharat and (iv) the biggest manufacturer of T2E globally in terms of production volume and the only manufacturer of this product in Bharat. The sales of the advanced intermediates and speciality chemicals products are predominantly conducted on a business-to-business basis both in Bharat and internationally. They export products to 18 countries, including Italy, Spain, Germany, the United States and other parts of the world. Company has two Manufacturing sites at Sachin in Surat (Gujarat, Bharat). The Manufacturing Facility 1 is an approximately 3,500 square meters facility including the R&D Facilities, the analytical sciences laboratories, the Pilot Plant, the CRAMS facility and the hydrogenation facility. The Manufacturing Facility 2 spans approximately 10,500 square meters and acts as a large scale manufacturing facility with an installed capacity of 6,096 MT per annum (for the solvent recovery plant ('SRP Plant'): 13,140 MT) distributed among three buildings that host 16 production streams (and one SRP Plant Stream), as of December 31, 2021. The capacity utilization was 77.47% (for the SRP Plant: 77.64%) in the nine months ended December 31, 2021 and 73.75% (for the SRP Plant: 72.99%) in Fiscal 2021. Both the facilities are in close proximity to the Hazira Port and JNPT Port, which helps them save freight costs for the exports. In August 2021, they commenced construction of a new manufacturing facility (Manufacturing Facility 3) at Sachin, and they are in discussions with relevant authorities for acquiring land for the fourth manufacturing facility (Manufacturing Facility 4) at Sachin. Both these new Manufacturing Facilities (3 and 4) will be within a short distance from the Manufacturing Facility 2. As per financial performance, Aether has posted total income/net profits of Rs 203.28 Cr / Rs 23.26 Cr (FY19), Rs 303.78 Cr / Rs 39.73 Cr (FY20), Rs 453.79 Cr / Rs 71.06 Cr (FY21) and Rs 449.32 Cr / Rs 82.76 Cr (9M FY22). So company has posted very good results over last couple of years. They have posted an average EPS of Rs. 5.51 and average RoNW of 47.5% for last three fiscals. Issue is priced at a P/BV of 20.08 as per NAV of 31.97 on 31.12.21. If we attribute latest earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 112 and as per FY22 annualised earnings P/E is around 72, which looks fully priced. As per RHP, comparison between listed players is shown in above table. On BRLM's front, 2 lead managers are associated with this IPO, and have handled around 35 IPOs in last three fiscals.HDFC Bank Limited: This is 9th IPO from this BRLM. From last 8 IPOs, 3 opened below issue price and remaining opened above issue on the day of listing. As of now, 5 are trading below issue price and other are trading above issue price. ( As on 21.05.22)Kotak Mahindra Capital Company Limited: This is 28th IPO from this BRLM. From last 10 IPOs, 4 opened below issue price and remaining opened above issue on the day of listing. As of now, 5 are trading below issue price and other are trading above issue price. ( As on 21.05.22) As per financials, Aether Industries Limited has shown very good growth, RoNW is 40.79% and P/E is respectively 112 and 72 as per FY21 and annualised FY22 earnings, which looks fully priced. Company is in Speciality Chemical sector and has very good growth opportunities. Also company is planning for expansion. So except valuations on all parameters company is good and in current market if there is any miss in performance, such companies see high selling pressure. Performance of BRLMs are average. So, we give NEUTRAL rating for this IPO and one may buy it from open market if there is any price correction post listing.
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