Aeroflex Industries Limited IPO

About the company:

Incorporated in 1993, Aeroflex Industries Limited (AIL) are manufacturers and suppliers of environment friendly metallic flexible flow solution products including 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) tubes, expansion bellows, compensators and related end fittings collectively known as flexible flow solutions catering to global as well as domestic markets. It exports its products to more than 80 countries including Europe, USA and others. The company supplies its products to a wide spectrum of industries for controlled flow of all forms of substances including air, liquid and solid.

Objects of the Offer:

The company intends to utilize the net proceeds from the fresh issue towards the following objects:
1. Full or part repayment and/or prepayment of certain outstanding secured borrowings (including foreclosure charges, if any) availed by the Company;
2. Funding working capital requirements of the Company; and
3. General corporate purposes and Unidentified Inorganic Acquisitions.

Key Strengths and Opportunities:

- Aeroflex Industries is a global flexible flow solutions company developing and manufacturing metallic flexible corrugated hoses, assemblies and fittings for a diverse range of industrial sectors, which are used on an ongoing basis for efficient flow of varied types of materials and substances including liquid, air and solid from one point to another. This makes these solutions critical to the substance, process, and the entire ecosystem. Company’s manufacturing facility and certified processes, global footprint and exposure in over 80 countries, track record of commercializing and scaling up new products and research and development capabilities, position them advantageously to capture requirements of diverse end user industrial sectors.
- The company is the manufacturer of metallic flexible flow solutions in the country (Make-in-India, Make-For-World) with an installed capacity of 11 million meters per annum. The Company’s manufacturing facility, located at Taloja, Navi Mumbai, Maharashtra. It is the primary manufacturer of flexible flow solutions with no listed peers with advanced manufacturing facility and R&D infrastructure.
- Given the critical nature of the applications, the company’s solutions are subject to, and measured against quality standards (at both customer level as well as at the regulatory authority level governing the end user industry) and rigorous product approval systems with stringent design, engineering and use specifications, which act as significant entry barriers for new players. Also, where the company supplies its products to OEMs, the end products of those OEMs are typically subject to stringent regulatory and industry standards where any change in the vendor of the product may require significant time and expense on part of the OEMs, which acts an exit barrier and disincentives any such changes for them also.
- The Company’s professional team has experience in production, R&D, quality control and sales & marketing. The knowledge and experience of its management and its team of dedicated personnel provide with a competitive advantage as they seek to grow their existing markets and enter new geographical markets. It’s senior management team have relevant experience and know-how in the flexible flow solutions industry, across business development, research and development, operations, administration, marketing and human resource management. The Company’s professional team has experience in production, R&D, quality control and sales & marketing.

Risks:

- The Company exports their products to various countries and the export operations of the Company contribute more than 80% of Revenue from Operations, out of which export to USA constitutes 28% and 32% of the revenue from operations for the Fiscals March 31, 2023 and March 31, 2022. On account of the aforesaid, AIL may be subject to significant import duties or restrictions of the relevant jurisdictions and its inability to comply with related requirements may have an adverse effect on its business and results of operations.
- AIL in the usual course of business does not enter into long-term contracts with suppliers for its raw materials They are dependent on China for a significant portion of raw material suppliers, the loss of any major suppliers or increase in the cost of raw material by any supplier, or a shortfall in the availability or quality of such raw materials, in a timely manner or at all, could have an adverse effect on the business and results of operations.
- The business of AIL is dependent and will continue to depend on its single manufacturing facility, and they are subject to certain risks in that behalf. Any slowdown or shutdown in its manufacturing operations could have an adverse effect on its business, financial condition and results of operations.
- The Company requires significant amounts of working capital and significant portion of their working capital is consumed in trade receivables and inventories. Their inability to meet their working capital requirements including failure to realize receivables and inventories may have an adverse effect on their results of operations and overall business.

Financial Snapshot: