Aether Industries IPO closes today, grey market premium falls; Should you subscribe?

Aether Industries IPO has entered its final day of subscription today after having been subscribed 0.49 times so far. The Rs 808 crore IPO of the specialty chemical manufacturer is a mix of fresh issue of equity shares and an Offer For Sale (OFS) by existing shareholders of the company. So far none of the investor categories have been fully subscribed. Aether Industries’ shares have also seen a tepid performance in the grey market, with stock quoting a weak premium in the unlisted space of just Rs 10 apiece, down from Rs 20 per share on Monday when the IPO opened.

Qualified Institutional Buyers (QIB) have subscribed their portion of the issue 0.39 times with bids coming in for 10.8 lakh shares against the 27.48 lakh on offer. Non-Institutional Investors (NII) have bid for the issue just 0.16 times, the lowest among all categories. Bids under the NII category have come for just over 3 lakh shares while 19.47 lakh stocks are reserved for the category. Retail investors have subscribed their portion of the issue 0.67 times, bidding for 30.63 lakh shares in the first two days. More than 45 lakh shares have been reserved for retail investors. The highest bidding has been done by employees of Aether Industries, bidding for a little over 1 lakh shares against the 1.17 lakh that are on offer. 

Investors can bid for Aether Industries IPO today in a fixed price band of Rs 610-642 per share, in a bid lot of 23 equity shares of face value Rs 10 each. This translates to a minimum investment of Rs 14,766 per investor. Post issue, promoter shareholding in Aether Industries will fall to 87.09% from the current 96.97%. Public shareholding in the firm will increase to 12.91% from 3.03%.

Analysts’ views mixed on Aether

“At higher price band of Rs 642, Aether is demanding an EV/Sales multiple of 13.1x, which is in-line to peer average of 15.2x,” said analysts at Choice Broking. “Considering its dominant position in the select specialty chemicals and growth prospects from the end-use applications, we feel the company has a buoyant outlook. However, a stretched valuation is a concern,” they added while advising investors to subscribe to the IPO with caution. Of the fresh issue, Aether Industries will spend Rs 163 crore to fund the proposed greenfield expansion; Rs 137.9 crore will be utilized for repayment/prepayment of the borrowings and the remaining Rs 165 crore will be used to fund the working capital requirement of the company.

Analysts at Marwadi Financial Services also have a ‘Subscribe with caution’ rating on the public issue of Aether Industries saying that the company has low and declining Operating Cash Flow to EBITDA ratio which keeps them cautious from a long-term perspective. 

Holding a much brighter outlook, Anand Rathi has pinned a ‘Subscribe-Long term’ rating on the IPO. The brokerage firm said that at the upper end of the IPO price band, Aether Industries is valued at 72.3 times on annualized basis of FY22 earnings which is ‘fairly valued’ in their view. 

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