TechEra Engineering (India) Limited is set to make its mark in the Indian Aerospace, Defence, and Automation sector with its Initial Public Offering (IPO). Opening for subscription on September 25, 2024, and closing on September 27, 2024, TechEra aims to raise ₹35.89 Crores through a Book Built Issue consisting entirely of a Fresh Issue of 43.77 Lakh Shares. The allotment date is expected to be finalized on September 30, 2024, with shares tentatively listed on the NSE SME by October 3, 2024.

The share price band is set between ₹75 to ₹82, and the minimum lot size for investors is 1,600 shares. Retail investors are required to invest a minimum of ₹1,31,200, while High-Net-Worth Individuals (HNIs) need to invest for 2 lots (3,200 shares), totaling ₹2,62,400.

Subscription and Market Performance

As of 05:00 PM on September 25, 2024, the TechEra Engineering IPO has garnered a subscription rate of 1.94 times on its first day, indicating a moderate interest from investors. The Grey Market Premium (GMP) is projected to range between ₹10 to ₹13, suggesting potential listing gains of 10% to 15%. However, it is important to note that the GMP is primarily a speculative indicator, and actual trading will determine the final listing price.

Anchor Investors and Capital Allocation

TechEra Engineering has successfully raised ₹10.22 Crores from Anchor Investors at the upper price band of ₹82 per share, allocating 12,46,400 equity shares to them. This allocation underscores confidence from institutional investors, although retail investors should assess their individual risk appetite.

Objectives of the IPO

The proceeds from the Fresh Issue will be directed towards several key objectives, including:

Capital Expenditure: Approximately ₹2,000.00 Lakhs will fund the purchase of new machinery to enhance production capabilities.

Working Capital: About ₹600.00 Lakhs is earmarked for working capital requirements.

Debt Repayment: Approximately ₹500.00 Lakhs will be used to prepay or repay outstanding borrowings.

General Corporate Purposes: The remaining funds will address various corporate expenses and strategic initiatives.

Financial Performance Overview

TechEra Engineering has shown a notable growth trajectory in its financial metrics over the past few years. The company reported revenues of ₹736.74 Lakhs, ₹2,659.13 Lakhs, and ₹3,907.66 Lakhs for Fiscal Years 2022, 2023, and 2024, respectively. The EBITDA figures reflect a significant turnaround, with profits rising from a negative ₹357.69 Lakhs in FY22 to ₹901.38 Lakhs in FY24. The Profit After Tax (PAT) has also improved markedly, going from a loss of ₹628.70 Lakhs in FY22 to a profit of ₹482.25 Lakhs in FY24.

The IPO offers a pre-issue Earnings Per Share (EPS) of ₹4.14, with a post-issue EPS of ₹3.83. The pre-issue Price-to-Earnings (P/E) ratio stands at 19.80x, while the post-issue P/E ratio is 21.40x. Comparatively, the industry P/E ratio is significantly higher at 84.98x. The company's Return on Capital Employed (ROCE) for FY24 is 23.47%, and the Return on Equity (ROE) is 30.33%, indicating efficient use of capital and strong profitability metrics.

Investment Recommendation

Despite TechEra Engineering's promising growth and solid financial performance, the high industry P/E ratios and relatively modest listing gains suggest a cautious approach for potential investors. Given the current market dynamics and financial health, we recommend that investors Avoid the TechEra Engineering India Limited IPO for listing gains or long-term investment.

Investors should consider the broader implications of investing in the Aerospace and Defence sector, including the potential volatility and the competitive landscape. As the IPO progresses, it is crucial for investors to stay informed and make data-driven decisions.

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