Aimtron Elect NSE SME lPO review (Avoid)

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Review By Dilip Davda on May 28, 2024

•    The company is engaged in the business of providing products and solutions for electronics systems.
•    It marked inconsistency in its financial performance with boosted bottom lines for the last 21 months working. 
•    Based on annualized super earnings for FY24, the issue appears aggressively priced. 
•    The company is operating in a highly competitive and fragmented segment.
•    There is no harm in skipping this greedily priced offer. 

PREFACE:
This company filed its DRHP on December 18, 2023, but this documents were available only on the designated exchange website, and surprisingly it was not available on either Lead Manager's website or the Company website till Tuesday - May 28, 2024 morning. The IPO price band announcement came in Financial Express dated May 24, 2024, but no RHP was available on any public domains. It's a matter of compliance, where LM has failed to keep its website updated and has not even perhaps instructed the company for such compliances. We are failing to understand why such lapses are found and no action from regulators is taken in the right spirit. This kind of things have become common for SME IPOs in general and with this lead manager in particular. Such thing is not found as far as Mainboard IPOs draft documents are concerned. 

ABOUT COMPANY:
Aimtron Electronics Ltd. (AEL) is engaged in the business of providing products and solutions towards electronics system design and manufacturing ("ESDM") services with a focus on high value precision engineering products. It provides product and solutions right from printed circuit board ("PCB") design and assembly to the manufacturing of complete electronic systems ("Box Build"), to certain domestic and global manufacturers located in India, United States of America, Hong Kong, United Kingdom, Spain, Mexico.

The company offers tailored solutions for customers' needs, encompassing automated micro-electronics assembly and precision component integration. AEL's solutions involve its client providing the design for the product for which it provides manufacturing services or in some cases require AEL to design the relevant product based on the specifications provided by the client including manufacturing of the product. Its solutions primarily comprise of: (i) printed circuit board assembly ("PCBA"), (ii) any box build assemblies in addition to finding its application in battery management systems used in electrical vehicles (iii) design solutions offering end to end services right from conceptualizing the design, engineering, product prototype development, manufacturing of turnkey requirements for customers. 

AEL started in 2011 as a pure play PCB designer and assembler and over the years has invested in capabilities and become one stop ESDM solution provider. Each of its diversified capabilities stands alone on its own merit, providing customers with a number of options while also enabling its growth in each of these areas. The Company offers a broad range of products and services across multiple industry segments. These ESDM products and services are essential for industrial automation, electric vehicle mobility, IoT and embedded systems, medtech and wearables, gaming, robotics etc. They provide higher-level monitoring and control various functions of machines to define, organize, and meet production objectives. The end-use industries that it caters to include: Industrial sector, Medical & Healthcare Equipment, Automobiles, Power, Gaming, Drones and UAV (unmanned aerial vehicle) etc. As of December 31, 2023, it had 132 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 5404800 equity shares of Rs. 10 each to mobilize Rs. 87.02 cr. at the upper cap. It has announced a price band of Rs. 153 - Rs. 161 per share. The issue opens for subscription on May 30, 2024, and will close on June 03, 2024. The minimum application to be made is for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.48% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 15 cr. for repayment of certain outstanding borrowings, Rs. 18.63 cr. for capex on installation of additional plant and machinery, Rs. 25.20 cr. for working capital, and the rest for general corporate purposes. 

As the company did a pre-IPO placement of 464000 equity shares at a price of Rs. 148 per share (worth Rs. 6.87 cr.), the IPO size is reduced to that extent. 

The issue is solely lead managed by Hem Securities Ltd., and Link Intime India Pvt. Ltd., is the registrar to the issue. HEM group's Hem Finlease Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the company issued further equity capital in the price range of Rs. 75.26 -Rs. 550 per share between December 2015 and February 2024. It has also issued bonus shares in the ratio of 4 for 1 in October 2023.The average cost of acquisition of shares by the promoters is Rs. 2.00, Rs. 3.11, and Rs. 18.93 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 15.01 cr. will stand enhanced to Rs. 20.41 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 328.66 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit/ -(loss) of Rs. 54.06 cr. / Rs.  15.72 cr. (FY21), Rs. 26.89 cr. / Rs. - (1.80) cr. (FY22), Rs. 72.40 cr. / Rs. 8.63 cr. (FY23). For 9M of FY24 ended on December 31, 2023, it earned a net profit of Rs. 9.77 cr. on a total revenue of Rs. 67.64 cr. 

For the last three fiscals, it has reported an average EPS of Rs. 9.14 and an average RoNW of 23.09%. The issue is priced at a P/BV of 5.71 based on its NAV of Rs. 28.19 as of December 31, 2023. Its post-IPO NAV data on the lower and upper price band is missing from IPO price band advertisement.
 
If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 25.24. Thus the IPO appears aggressively priced and has posted inconsistency in its top and bottom lines. The sudden boost in bottom lines for the last 21 months raise eyebrows and concern over its sustainability as it is operating in a highly competitive and fragmented segments.  

For the reported periods, the company has posted PAT margins of 29.78% (FY21), - (6.84) % (FY22), 12.06% (FY23), 14.56% (9M-FY24), and RoCE margins of 87.29%, - (5.55) %, 25.33%, 27.93% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Kaynes Techno, Vinyas Innovative, Avalon Techno, and Syrma SGS, as their listed peers. They are trading at a P/E of 115, 99.7, 113, and 76.9 (as of May 28, 2024). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 44th mandate from Hem Securities in the last three fiscals (including the ongoing one), out of the last 10 listings, 1 listed at discount and the rest with premiums ranging from 4.63% to 165.22% on the date of listing. 

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