What you must know about Aimtron Electronics IPO?

Aimtron Electronics Ltd – About the company

Aimtron Electronics Ltd  was incorporated in the year 2011 to provide products and solutions for electronics system design and manufacturing (ESDM). The primary focus of Aimtron Electronics Ltd is on high-value precision engineering products. Among the various services that it offers are; PCB (printed circuit board) design, PCB assembly, and complete electronic system manufacturing for domestic and international manufacturers. It has a client presence in the US, UK, Hong Kong, Spain, and Mexico, apart from a strong India presence. Aimtron Electronics Ltd is also into box build assemblies and in finding their applications in battery management systems used in EVs (electrical vehicles). In addition, the company also offers the complete suite of design solutions ranging from design concept to engineering and also includes prototype development as well as manufacturing on a contract basis on behalf of clients. Aimtron Electronics Ltd has 2 production facilities located at Vadodara and Bengaluru. It employs 131 persons on its rolls, including 28 engineers.

Highlights of the Aimtron Electronics IPO

Here are some of the highlights of the Aimtron Electronics IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 30th May 2024 and closes for subscription on 03rd June 2024; both days inclusive.
   
• The stock of the company has a face value of ₹10 per share and it is a book built issue. The price for the book building issue is set in the price band of ₹153 to ₹161 per share. Being a book built issue, the final price will be discovered within this band.
   
• The IPO of Aimtron Electronics Ltd has only a fresh issue component and no offer for sale (OFS) portion. While the fresh issue portion is EPS dilutive and equity dilutive, the OFS is just a transfer of ownership and  hence is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the IPO, Aimtron Electronics Ltd will issue a total of 54,04,800 shares (54.05 lakh shares approximately), which at the upper band IPO price of ₹161 per share aggregates to fresh fund raising of ₹87.02 crore.
   
• Since there is no OFS, the fresh issue size will also double as the overall issue. Therefore, the overall IPO size will also comprise of the issue of 54,04,800 shares (54.05 lakh shares approximately) which at the upper band IPO price of ₹161 per share will aggregate to overall IPO size of ₹87.02 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 2,81,600 shares. Hem Finlease Private Ltd will be the market makers to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Mukesh Jeram Vasani, and Nirmal Vasani. The promoter holding in the company currently stands at 100%. However, post the fresh issue of shares, promoter equity holding share will get diluted to 72.91%.
   
• The fresh issue funds will be used by the company for capex towards additional plant & machinery, repayment of high cost borrowings and for working capital purposes. Some part of the funds will also be used for general corporate expenses.
   
• Hem Securities Ltd will be the lead manager to the issue, and Link Intime India Private Ltd will be the registrar to the issue. The market maker for the issue is Hem Finlease Private Ltd.

The IPO of Aimtron Electronics Ltd will be listed on the SME IPO segment of the NSE.

Aimtron Electronics IPO – Key Dates

The SME IPO of Aimtron Electronics Ltd IPO opens on Thursday, 30th May 2024 and closes on Monday, 03rd June 2024. The Aimtron Electronics Ltd IPO bid date is from 30th May 2024 at 10.00 AM to 03rd June 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 03rd June 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on June 05th 2024, will be visible to investors under the ISIN Code – (INE0RUV01018). This allocation to the demat account is only applicable to the extent of the allocation of shares and if no allocations are made in the IPO, then no credit would be visible in the demat account.

IPO allocation and minimum investment lot size

Aimtron Electronics Ltd has already announced the market maker allocation at 2,81,600 shares as inventory for market making. Hem Finlease Private Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the QIB investors, retail investors and the HNI / NII investors. The breakdown of the overall IPO of Aimtron Electronics Ltd in terms of allocation to various categories are captured below.

Data Source: Company RHP

The minimum lot size for the IPO investment will be 800 shares. Thus, retail investors can invest a minimum of ₹1,28,800 (800 x ₹161 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 1,600 shares and having a minimum lot value of ₹2,57,600. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

There are no upper limits for investments by HNIs / NIIs in the IPO of Aimtron Electronics Ltd.

Financial highlights: Aimtron Electronics Ltd

The table below captures the key financials of Aimtron Electronics Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The revenues over the last 3 years have been quite erratic. For example, sales fell sharply in FY22 and has picked up sharply in FY23. If you compare FY23 with FY21, the sales growth is just about 40% over the last 2 years overall. Net profits have followed a similar cycle, even as current year net profits are half of FY21 net profits, largely due to a spike in the cost of raw materials used in the latest year FY23.
   
• While net margins of the company are fairly attractive at 8.63% in the latest year, the margins have been erratic in the last 3 years. Again PAT margins are less than half of FY21, due to the impact of sharply higher cost of raw materials. The return on equity (ROE) stands at 27.64% in FY23, while the return on assets (ROA) is robust at 9.88% in FY23. However, as we mentioned earlier, the erratic losses in FY22 and the fall in profits in FY23, compared to FY21, makes it tough to take a comparative sustainable view.
   
• The asset turnover ratio or the sweating ratio has been at 0.82X and that is good considering the capital intensity of the business. However, this sweating ratio also gets supported by the robust levels of return on assets (ROA). We need to wait for a more sustainable number to be able to take a call.

The company has latest year EPS of ₹29.60 and we have not included the weighted  average EPS, since the previous year data is not exactly comparable. The latest year earnings are being discounted by the IPO price of ₹161 per share at 5-6 times P/E ratio. That looks fine, but for the volatility in numbers we have seen in the last few years. Since the company is yet to announce the FY24 results, we can use available data to extrapolate. The 6-month EPS for FY24 stands at ₹4.88 per share and when extrapolated to full-year EPS of ₹9.76, it translates into a more believable P/E ratio of 16-17 times earnings.

To be fair, Aimtron Electronics Ltd some bring some intangible advantages to the table. It has a diversified range or products and an expertise in handling complex product problems. Its relationships with OEM customers have stood the company in good stead, and that is another big positive. However, the big question is whether 16-17 times forward earnings can be justified for a business that typically has a net margins in the range of 3-4% on an average. One question that the company has not answered is how the ROE will grow, since that is the key to valuations in the future. Investors must first satisfy themselves on this point. This will certainly be an investment that entails a higher level of risk and longer waiting period. Investors must position themselves accordingly.