Aeroflex Industries IPO lists at 75.93% premium, but falls later

Aeroflex Industries Ltd had a very robust listing on 31st August 2023, listing at a smart premium of 75.93%, but came under pressure later in the day. While the closing price of the stock of Aeroflex Industries Ltd on 31st August 2023 was still well above the IPO price, it dipped sharply below the opening listing price of the day. In a sense the stock opened strong but failed to rally and instead fell by nearly 13.9% from the listing price indicating a lot of selling pressure on the stock as traders rushed to unwind the positions. Typically, the funded positions tend to aggressively unwind if the listing is at a huge premium to the issue price since the deal works out profitable for them including the cost of funds. The overall stock market performance on 31st August 2023 did not help as the Nifty dipped 94 points ahead of the Q1 GDP numbers to be announced later in the day. For the day, the Nifty closed 94 points lower while the Sensex closed a full 256 points lower. Both the Nifty and the Sensex performance had an impact on the post listing performance of Aeroflex.

Due to the tepid markets, the stock remained subdued through the day, despite a very smart listing on 31st August 2023. The stock had seen strong subscription in the IPO. The subscription was 97.11X  overall and QIB subscription at 194.73X. Hence the listing was expected to be extremely strong. However, while the listing was strong, the performance strength got reduced on 31st August 2023 due to the weak performance by the generic indices. While the start was good, the stock could not sustain the enthusiasm. Here is the Aeroflex Industries Ltd listing story on 31st August 2023.

IPO subscription and pricing details

The IPO price was fixed at the upper end of the band at ₹108 which was anyways along expected lines considering the extremely strong 97.11X overall subscription and the 194.73X QIB subscription in the IPO. In addition, the retail portion had got subscribed 34.41X in the IPO while the HNI / NII portion also got a healthy subscription of 126.13X. The price band for the IPO was ₹102 to ₹108. On 31st August 2023, the stock of Aeroflex Industries Ltd listed on the NSE at a price of ₹190, a very strong premium of just 75.93% over the IPO issue price of ₹108. On the BSE also, the stock listed at ₹197.40, a premium of just 82.78% over the IPO issue price of ₹108 per share.

How the stock of Aeroflex Industries Ltd closed on both exchanges

On the NSE, Aeroflex Industries Ltd closed on 31st August 2023 at a price of ₹163.60. That is a first day closing premium of 51.48% on the issue price of ₹108 but it represents a discount of -13.89% on the listing price of ₹190. In fact, the listing price turned out to be very close to the high price of the day and the stock traded for the entire trading day below the opening listing price. On the BSE, the stock closed at ₹163.15. That represents a first day closing premium of 55.15% above the IPO issue price but a steep discount of -17.35% on the listing price on the BSE of ₹197.40. On both the exchanges, the stock listed strongly above the IPO issue price but ended up closing Day-1 falling from the opening price levels. In fact, the opening price turned out to be very close to the high price of the day on both the exchanges. The high price of the day was just slightly above the opening price on both the exchanges, which could be attributed to consistent profit taking after a strong start. Clearly, the tepid performance of the markets overall also had its impact on the stock on 31st August 2023 allowing the stock to close the day well above the issue price for the day but sharply lower than the listing price.

Price volume story on the NSE

The table below captures the opening price discovery in the pre-open period on the NSE.

Data Source: NSE

Let us look at how the stock traversed on the National Stock Exchange (NSE) on 31st August 2023. On Day-1 of listing, Aeroflex Industries Ltd touched a high of ₹196.35 on the NSE and a low of ₹162.30. The premium to the IPO issue price sustained through the day, although the stock did trade at a discount to the listing price for most part of the day. Mainboard IPOs also do not have any upper or lower circuits of 5%, unlike SME IPOs. If you look at the range of prices, the stock opening price turned out to be close to the high point of the day while the closing price of the day was just a tad above the low price of the day on the NSE. The tepid post-listing performance of the IPO stock was triggered by weak markets with the Nifty and Sensex falling sharply ahead of the GDP data for the quarter. On Day-1 of listing, the Aeroflex Industries Ltd stock traded a total of 360.98 lakh shares on NSE amounting to value of ₹635.65 crore during the day.  The order book during the day showed a lot of back and forth with the bias clearly in favour of the sellers, far exceeding the buyers. The stock closed the day with pending buy orders of 11,079 shares on the NSE.

Price volume story on the BSE

Let us now turn to how the stock traversed on the Bombay Stock Exchange (BSE) on 31st August 2023. On Day-1 of listing, Aeroflex Industries Ltd touched a high of ₹197.40 on the BSE and a low of ₹162.10. The premium to the IPO issue price sustained through the day, although the stock did trade at a discount to the listing price for most part of the day. Mainboard IPOs also do not have any upper or lower circuits of 5%, unlike SME IPOs. If you look at the range of prices, the stock opening price turned out to be the high point of the day while the closing price of the day was just a tad above the low price of the day on the BSE. The tepid post-listing performance of the IPO stock was triggered by weak markets with the Nifty and Sensex falling sharply ahead of the GDP data for the quarter. On Day-1 of listing, the Aeroflex Industries Ltd stock traded a total of 33.15 lakh shares on the BSE amounting to value of ₹59.10 crore during the day.  The order book during the day showed a lot of back and forth with the bias clearly in favour of the sellers, far exceeding the buyers.

Market capitalization, free float, and delivery volumes

While the volumes on the BSE were not as much as on the NSE, the trend was once again the same. The order book through the day showed a lot of weakness with the sellers consistently outnumber the buyers. The sharp fall in the Nifty and the Sensex from higher levels also kept the pressure on the markets and the IPO stock. On the NSE, out of the total 360.98 lakh shares traded during the first day of trading, the deliverable quantity represented 164.12 lakh shares or a deliverable percentage of 45.46% on the NSE, which is around the routine listing day median. That shows a lot of delivery action in the counter. Even on the BSE, out of the total 33.15 lakh shares of quantity traded, the deliverable quantity at a gross across client level was 17.43 lakh shares representing total deliverable percentage of 52.57%, well above the delivery action on the NSE. Unlike the SME segment stocks, which are on T2T on the day of listing, the mainboard IPOs permit intraday trading even on the day of listing.

At the close of Day-1 of listing, Aeroflex Industries Ltd had a market capitalization of ₹2,109.86 crore with free-float market cap of ₹379.78 crore. Aeroflex Industries Ltd has issued capital of 12.93 crore shares with a par value of ₹2 per share.

Brief on the business of Aeroflex Industries Ltd

Aeroflex Industries Ltd was incorporated in 1993 and the company is into the manufacture of environment-friendly metallic flexible flow solution products made of stainless steel. Its product catalogue includes braided hoses, un-braided hoses, solar hoses, gas hoses, vacuum hoses, interlock hoses, hose assemblies, lancing hose assemblies, jacketed hose assemblies, exhaust connectors, exhaust gas recirculation tubes, expansion bellows, and related end fittings. The company has more than 1,700 Product SKUs (Stock Keeping Units) in its product catalogue. Its manufacturing plant is located at Taloja, Navi Mumbai. Its client list includes distributors, fabricators, Maintenance Repair and Operations Companies (MROs), Original Equipment Manufacturers (OEMs), and companies in a host of other industry groups.

Aeroflex Industries Ltd has established itself as one of the leading manufacturers globally of flexible hoses and currently exports its products to more than 80 countries. Stainless steel hoses, in which Aeroflex Industries Ltd specializes, is capable of handling high temperatures as well as shocks and vibrations. The demand for stainless steel hoses is expected to increase by 50-60% in the next 3 years, the business volumes are expected to expand rapidly. SAT Industries, which is listed on the NSE and on the BSE, is the holding company of Aeroflex Industries Ltd. The issue will be lead managed by Pantomath Capital Advisors Private Ltd. Link Intime India Private Ltd will be the registrar to the issue.