Unimech Aerospace and Manufacturing Limited, a Bengaluru-based high-precision engineering solutions company, is set to launch its Initial Public Offering (IPO) on December 23, 2024. The subscription period will close on December 26, 2024. Here’s a detailed breakdown of the IPO to help you make an informed decision.
IPO Highlights
| Detail | Information |
|---|---|
| Price Band | ₹745 to ₹785 per equity share |
| Issue Size | ₹500 crore (Fresh Issue: ₹250 crore; OFS: ₹250 crore) |
| Lot Size | 19 shares per lot |
| Promoter Holding | Post-IPO: 80% (down from 92%) |
| Listing Date | December 31, 2024 (BSE and NSE) |
Financial Performance
| Metric | FY23 | FY24 |
|---|---|---|
| Revenue (₹ Cr) | 94.2 | 208.8 |
| PAT (₹ Cr) | 22.8 | 58.1 |
| Gross Margin (%) | — | 79 |
| EBITDA Margin (%) | — | 44 |
| Net Margin (%) | — | 32 |
| ROE (%) | — | 73.8 |
| ROCE (%) | — | 70.7 |
Strengths
- High Entry Barriers: Manufacturing critical components for aerospace, defense, and other industries creates significant entry barriers, allowing for high profit margins.
- Diversified Offerings: The company serves 26 customers across seven countries, catering to aerospace, defense, energy, and semiconductor sectors.
- Consistent Growth: Revenue and PAT have shown significant year-over-year growth, indicating strong demand and operational efficiency.
- Advanced Infrastructure: The company’s state-of-the-art manufacturing facilities and experienced workforce position it as a leader in precision engineering.
Risks
- Client Concentration: Around 94.62% of revenue in H1 FY25 came from the top five customers, reflecting heavy reliance on a few clients.
- Working Capital Intensive: High receivable days indicate less bargaining power and a reliance on significant working capital.
- Macroeconomic Factors: Dependency on industries like aerospace and defense makes the company vulnerable to geopolitical tensions and budgetary constraints.
- Competition Risk: Competing with well-established players like MTAR Technologies could impact market share and profitability.
Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 68.7 times |
| P/B Ratio | 6.2 times |
| Grey Market Premium | ₹406 |
Peer Comparison: Peers like MTAR Technologies and Azad Engineering trade at higher valuations, making Unimech’s pricing attractive. However, the P/E ratio of 68.7 suggests a premium valuation that requires strong future performance to justify.
Use of IPO Proceeds
| Purpose | Amount (₹ Cr) |
|---|---|
| Capacity Expansion | 80 |
| Working Capital | 70 |
| Debt Repayment | 40 |
| General Corporate Purposes | Remaining amount |
Industry Outlook
The aerospace and defense sectors are poised for growth, driven by increasing government spending, advancements in technology, and rising demand for precision components. India’s Make in India initiative and the push for self-reliance in defense manufacturing further bolster the prospects for companies like Unimech Aerospace. Additionally, the energy and semiconductor sectors’ growth adds further diversification to the revenue streams.
Grey Market Sentiment
As of December 20, 2024, the Grey Market Premium (GMP) for Unimech Aerospace shares stands at ₹406, reflecting robust demand and positive sentiment among investors. This suggests the stock could see strong listing gains, but GMP trends should not be the sole determinant for investment decisions.
Should You Invest?
Pros:
- Strong financial growth with impressive margins.
- Positive grey market sentiment.
- Strategic presence in high-growth industries like aerospace and defense.
Cons:
- High dependence on a few clients.
- Valuation is on the higher side, requiring consistent performance.
Verdict: Unimech Aerospace’s robust growth trajectory and sector presence make it an appealing investment. However, weigh the risks of client concentration, valuation, and working capital demands before making a decision. Long-term investors with a high-risk appetite may find this IPO particularly attractive.
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Disclaimer
This article is for informational purposes only and should not be construed as investment advice. FinGuys.in and its authors are not SEBI-registered financial advisors. Please consult a certified financial advisor or conduct your own research before making any investment decisions. Investing in IPOs involves risks, including potential loss of capital. FinGuys.in is not responsible for any losses incurred as a result of reliance on this article.