Auro Impex & Chemicals Limited engaged in manufacturing of Collecting Electrode, Discharge Electrode Plate steel structures and other internal components of an Electrostatic Precipitator (ESPs) - a filtration device used to remove smoke and fine dust particles from flowing gas used in various heavy industries such as Steel Plants, Sponge Iron industry, Cement Plants, Thermal Energy Plants and any other plant where the coal is burnt, as a measure to control Air Pollution. The Company had set up a Manufacturing facility for manufacturing of Electrostatic precipitator internals for both American and European designs in the state of West Bengal, spread across an area of 2.44 acres of land with all the requisite machines and equipment, with the goal of becoming one of the top producers of ESP Internals (Collecting Electrode, Discharge Electrode, Electro- magnetic rapper, Tank Fabrication and Duct Fabrication and ESP Internal spare parts etc). Company is specifically engaged into manufacturing of (i) Collecting Electrodes of all profiles, (ii) Discharge Electrodes, (iii) Electro- magnetic rapper, (iv) Tank Fabrication and Duct Fabrication, and (v) other ESP Internal spare parts, for some Original Equipment manufacturers (OEMs) and service providers ranging from sourcing of components, designing, manufacturing, quality testing as per the specifications provided by OEMs and service providers. Company has been selling the products through renowned OEMs and Service Providers such as – Thermax Limited, Larsen & Toubro Limited, KC Cottrell India Private Limited, Isgec Heavy Engineering Limited, Hariaksh Industries Private Limited, Par Techno-Heat Pvt Ltd, Filter Flow Engineering Private Limited, Imeco Overseas Private Limited and other Brand owners. The subsidiary company of AICL, Auro Industries Ltd. (AIL), was incorporated in 1995 and began dealing foundry flexes, ferrous & non ferrous alloys before expanding into importing and trading of batteries, fans, refrigerators, lights, battery chargers and other electrical goods. Over time, AIL progressively expanded into importing of parts of Electrostatic precipitators such as hollow bushings, exporting essential parts of battery plate such as formation tanks and furniture used in the battery Industry and established itself as a merchant exporter. The subsidiary company has entered the wholesale distribution of tyres in 2020, leveraging the enormous customer network created over the years. AIL has grown to become exclusive distributors for well-known brand owners. As per financial performance, Auro Impex & Chemicals Limited has posted total income/net profits of Rs 73.72 Cr / Rs 0.90 Cr (FY21), Rs 151.84 Cr / Rs 2.30 Cr (FY22) and Rs 232.96 Cr / Rs 5.99 Cr (FY23), So company has shown very good growth, but sudden jump in net profit just before IPO raises concerns. Company has posted an average EPS of Rs 3.90/- and average RoNW of 35.13% for last three fiscals. Issue is priced at a P/BV of 4.12 as per NAV of Rs 18.91/- as on 31.03.23. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 40.17 and as per FY23 earnings P/E is 15.40. As per RHP, there are no listed peers. On BRLM's front, Affinity Global Capital Market Private Limited is associated with this IPO and not handled any SME IPOs in last 3 years. As Per financials, Auro Impex & Chemicals Limited has shown good results, RoNW is 34.18% and P/E is respectively 40.17 and 15.40 as per FY22 and FY23 earnings, which looks fully priced, but sudden rise in net-profit in just before IPO raises concerns. If company can provide same growth in future, that need to be tracked very closely. Company's client list looks good. This is first IPO from the BRLM. So we are giving SUBSCRIBE rating to this SME IPO, but SME IPOs are very risky due to very small market and bigger ticket size.
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