What you must know about Auro Impex & Chemicals IPO

Auro Impex & Chemicals Ltd, is an SME IPO on the NSE which is opening for subscription on 05th May 2023. The company, Auro Impex & Chemicals Ltd, was incorporated in the year 1994 for manufacturing, exporting, and supply of Discharge & Collecting Electrodes, and Electrostatic Precipitator (ESP). The company has a pedigree of over nearly 30 years now. It supplies to the Original Equipment manufacturers (OEMs) and service providers. In terms of its service offerings, it offers a full range of services from sourcing of components, designing, manufacturing, quality testing etc. Some of its higher respected clients in the OEM market include the heavy equipment players like Thermax, L&T, ISGEC Heavy Engineering etc.

What are the product applications? Collecting Electrodes are roll-formed from CRCA sheets and corrosion resistant Corten. These sections are used as dust collecting equipment for major pollution control applications in power plants, cement industries, paper, and sugar industries. Discharge Electrodes / Emitting Electrodes is the heart of Electrostatic Precipitator. The Discharge Electrodes emit charging ions that generate an electrical field between the discharge electrodes and the collecting plates. The company is also into support, shaft and hollow bushing, silo manufacturing and tank fabrication.

Key terms of the SME IPO of Auro Impex & Chemicals Ltd

Here are some of the highlights of the Auro Impex & Chemicals Ltd IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 05th May 2023 and closes for subscription on 09th May 2023; both days inclusive.
   

• The company has a face value of Rs10 per share and the issue price for the combination of fresh issue and OFS is priced in the price band of Rs74 to Rs78.
   

• The total IPO size of Rs.24.29 crore IPO of Auro Impex and Chemicals Ltd comprises of a fresh issue and an offer for sale (OFS) by promoters and early shareholders.

• Overall, the IPO entails the issue of 31.14 lakh shares, which at the upper price band of Rs78 per share works out to total issue size of Rs24.29 crore. Here is the break-down.
   

• The fresh issue portion entails the issue of 25.64 lakh shares which at the upper end of the price band at Rs78 is worth Rs20.00 crore.
   

• The OFS portion entails the issue of 5.50 lakh shares which at the upper end of the price band at Rs78 is worth Rs4.29 crore.
   

• In the case of the Auro Impex and Chemicals IPO, retail portion bidders can only bid in minimum lot size of 1,600 share each, entailing a minimum investment of Rs124,800 in the IPO at the upper end of the price band of Rs78 per share. That is also the maximum that a retail investor can bid in the IPO.
   

• HNIs, NIIs can bid for minimum of 2 lots of 3,200 shares entailing an investment of Rs249,600. This limit does not apply to the QIB portion of the IPO.
   

• The company has allocated 50% of the issue size for the QIB investors, 15% for the HNI / NII investors and the balance 35% is allocated to retail investors.
   

• The company has been promoted by Madhusudan Goenka and Praveen Kumar Goenka and the promoter stake in the company stands currently at 99.99%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted proportionately. The entire OFS of 5.50 lakh shares is being offered by Madhusudan Goenka.

While Affinity Global Capital Markets Private Ltd will be the lead manager to the issue, Cameo Corporate Services Ltd will be the registrar to the issue.

Key dates to be aware of in the Auro Impex & Chemicals Ltd IPO (SME)

The SME IPO of Auro Impex & Chemicals Td IPO opens on Friday, May 05th, 2023 and closes on Tuesday May 09th, 2023. The IPO bid date is from May 05th, 2023 10.00 AM to May 09th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the May 09th, 2023.

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.

Financial highlights of Auro Impex & Chemicals Ltd

The table below captures the key financials of Auro Impex & Chemicals Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

On the positive side, the revenues of the company have nearly doubled in the last two years on a CAGR basis, although sustaining this kind of growth is going to be tough. The profit margins have been fairly low which is quite normal in this business which is largely commoditized. However, the company has an established model with a matured market. Investors looking to invest in this company IPO must remember a few basis things. Firstly, this is an industry that has traditionally had low margins and that is likely to impact valuations. Secondly, the sector faces a lot of pressure from the unorganized sector and that can be a major challenge in terms of costs. Lastly, this is a business with low entry barriers.

The one area to keep a watch on is that the fresh issue is not going to create fresh capex but towards working capital gaps. That is generally a high risk allocation of IPO money and investors must factor that while investing in this IPO.