About AEROFLEX INDUSTRIES Limited

Company is a manufacturer and supplier of environment friendly metallic flexible flow solution products made of Stainless steel and bronze catering to global as well as domestic markets. It supplies its products to a wide spectrum of industries for controlled flow of all forms of substances including air, liquid and solid. Company exports its products to more than 80 countries which holds about 80% of its total sales. These countries include Europe, USA and others. The company intend to set up warehouses, distribution centres and business development offices in USA, Europe, Far East region and MENA region.

Product categories include:

• Braided Hoses
• Unbraided Hoses
• Solar Hoses
• Gas Hoses
• Vacuum Hoses
• Braiding
• Interlock Hoses
• Hose Assemblies
• Lancing Hose Assemblies
• Jacketed Hose Assemblies
• Exhaust Connectors
• Exhaust Gas Recirculation (EGR)
• Expansion Bellows
• Compensators
• Related End Fittings

Having 1700 SKUs as on 31^st Jan’23

Globally, the market for SS flexible hose was estimated to value at approximately USD 25 Bn in 2020 with the size of SS corrugated hose estimated at USD 12.5 Bn which is slated to grow to USD 38 Bn and USD 18 Bn by 2027, registering a CAGR of 7.5% and 6.3%, respectively. Favorable product features drive demand for SS flexible hoses. Urbanization boosts infrastructure and HVAC needs, while industrialization spurs demand for SS corrugated hoses.

The IIP index showed fluctuations this year. It dropped in October 2022, rebounded to 7.3%, then fell to 4.3% YoY growth in Dec 2022. Manufacturing (77.6% weight) grew 2.6%, mining 9.8%, and electricity 10.4%. December's YoY growth was higher due to a low base from the pandemic's third wave. Low base effect and festive sales may boost IIP, but external demand drop could affect manufacturing and overall growth. Government to invest ₹700 Bn (USD 9.97 Bn) for nationwide gas pipeline expansion. Aim to raise natural gas share from 6% (2019) to 15% by 2030.
In the 2023-24 Union Budget, the Ministry of Petroleum and Natural Gas received Rs 410 billion compared to Rs 339 billion in the previous year. With a thriving PNG and CNG sector, the CGD network's growth is projected to drive demand for Stainless Steel Corrugation Flexible Flow Solutions. Flexible Flow Solutions made with Stainless Steel Corrugation manufacturing landscape is fragmented, with numerous small and medium size players operating alongside few large players. However, there exists a technical barrier that clearly demarcates large established players from the smaller peers.

Short-term demand for Stainless Steel Corrugation Flexible Flow Solutions comes from process industries and HVAC systems due to capacity expansion and modernization. Stable demand from these sectors will persist. Long-term growth will be fueled by new applications like energy storage, semiconductors, and aviation. Recent steel industry expansions have boosted demand. Manufacturing sector projects further support demand. Transition from traditional hoses also accelerates growth.

RISK FACTORS FOR THE ISSUE

• Aeroflex exports contribute over 80% of the revenue, out of which the U.S. constituted 28% for FY23 and then top 5 countries holds 50% of the sales. This results in exposure of risk due to currency rate changes and many import duties and other obligations of other countries.
• The company doesn't sign long-term contracts with raw material suppliers or the long-term customers and is dependent on China for a significant portion of raw material supplies. Aeroflex is dependent and will continue to depend on one manufacturing facility in Navi Mumbai, with a total installed capacity of 11 million metres. Capacity utilization in the facility was 83% for FY23.
• The company needs to update various licenses on a regular basis, not fulfilling any such obligation might affect the business.