Aeron Composite Limited, part of the ‘A GROUP’, specializes in Fibre Reinforced Composites (FRP/GRP) for both industrial and recreational applications. Established to pioneer the manufacturing of advanced composite products, Aeron Composite offers high-quality solutions that meet national and international standards. With a diverse portfolio that spans ceramic refractories, composite materials, ceramic tiles, and more, the company has positioned itself as a key player in its sector.

IPO Details

The Aeron Composite IPO is a Book Built Issue amounting to ₹56.10 crores, comprising solely an Offer for Sale of 44.88 lakh shares. The subscription period for this IPO opens on August 28, 2024, and closes on August 30, 2024. Shares are expected to be allotted by Monday, September 2, 2024, with a tentative listing date on the NSE SME set for Wednesday, September 4, 2024.

The share price band is set between ₹121 to ₹125 per share, with a minimum lot size of 1,000 shares. Retail investors need to invest a minimum of ₹1,25,000, while High-Net-Worth Individuals (HNIs) must invest at least ₹2,50,000 (2 lots or 2,000 shares). Hem Securities Limited serves as the book-running lead manager, and Maashitla Securities Private Limited is the registrar for the issue.

Financial Performance

Aeron Composite has shown significant financial growth over recent years. Revenue surged from ₹7,906.12 lakhs in FY21 to ₹18,199.26 lakhs in FY23, with a current figure of ₹18,080.35 lakhs in 11MFY24. EBITDA also increased from ₹652.66 lakhs in FY21 to ₹1,277.93 lakhs in FY23, with ₹1,648.02 lakhs in 11MFY24. The PAT rose from ₹255.30 lakhs in FY21 to ₹661.15 lakhs in FY23, reaching ₹942.23 lakhs in 11MFY24. This steady financial performance reflects the company's growth trajectory and operational efficiency.

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Valuation Insights

For the Aeron Composite IPO, the company is issuing shares at a pre-issue EPS of ₹7.52 and a post-issue EPS of ₹5.54. The pre-issue P/E ratio stands at 16.62x, while the post-issue P/E ratio is 22.56x. These ratios are compared to an industry P/E ratio that suggests the IPO is fairly priced. Additionally, the company's Return on Capital Employed (ROCE) for 11MFY24 is 29.67%, and the Return on Equity (ROE) is 31.33%.

Grey Market Premium

The Grey Market Premium (GMP) for the Aeron Composite IPO is expected to range between ₹10 to ₹20. While the GMP can offer an early indication of investor sentiment, it is not a reliable measure for price discovery. The potential listing gains are estimated at 10% - 16%, based on current market trends and financial performance.

Allotment and Subscription Status

The IPO allotment date for Aeron Composite is set for September 2, 2024. Investors can check their allotment status on the Registrar’s website from this date. The process includes:

Visiting the IPO allotment status page.

Selecting Aeron Composite Limited IPO from the dropdown menu.

Entering your application number, PAN, or DP Client ID.

Submitting the details to view your allotment status.

Objectives of the IPO

The net proceeds from the IPO will be utilized as follows:

₹3,903.60 lakhs for funding capital expenditure towards setting up an additional manufacturing unit.

General corporate purposes.

Conclusion

Aeron Composite Limited’s IPO presents a solid opportunity for investors with its strong financial performance and growth prospects. However, given the Grey Market Premium and valuation metrics, the recommendation leans towards avoiding the IPO for listing gains or long-term investment. Potential investors should consider the company's robust revenue growth and operational improvements while weighing their investment decisions.

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