Unimech Aerospace and Manufacturing Ltd., a leading name in the aerospace and defence industry, has launched its Initial Public Offering (IPO) today, December 23, 2024. Investors are keen to know whether this IPO is worth subscribing to. In this detailed review, we will analyze the company’s background, financial performance, IPO details, strengths, risks, and market trends. By the end, you’ll have a clear idea of whether to apply for this IPO.
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Company Overview
Unimech Aerospace was established in 2016 and has since become a key player in manufacturing critical components for aerospace, defence, and other high-tech industries. Here’s a snapshot of the company:
- Core Business: Specializes in manufacturing complex tools, mechanical assemblies, electro-mechanical systems, and high-precision components.
- Industries Served: Aerospace, defence, semiconductors, and energy sectors.
- Location: Operates from two state-of-the-art facilities in Bangalore, India.
- Clientele: Supplies to top aerospace and defence contractors worldwide, ensuring a diversified revenue stream.
Unimech’s expertise in precision engineering and its focus on innovation has helped it carve out a niche in highly competitive markets.
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Unimech Aerospace IPO Details
Here are the key details about the IPO:
- Issue Size: ₹500 crore, consisting of a fresh issue of ₹250 crore and an Offer for Sale (OFS) worth ₹250 crore.
- Price Band: ₹745 to ₹785 per equity share.
- Lot Size: 19 shares, with a minimum investment of ₹14,915.
- IPO Dates: Open from December 23, 2024, to December 26, 2024.
- Listing Date: Expected to list on December 31, 2024, on both BSE and NSE.
Objectives of the IPO
The company aims to utilize the funds raised from the IPO for the following purposes:
- Capital Expenditure:
- Purchase of new machinery and equipment to expand production capacity.
- Enhancing technological capabilities to maintain a competitive edge.
- Working Capital:
- Meeting operational requirements and ensuring smooth business operations.
- Subsidiary Investments:
- Fund its material subsidiary for acquiring advanced machinery, managing working capital, and reducing debt.
- General Corporate Purposes:
- Addressing other corporate needs, such as marketing, research, and development.
Financial Performance
Unimech Aerospace has demonstrated strong financial growth over the years. Here’s a summary of its performance:
- Revenue Growth:
- Recorded consistent growth in revenue over the last three fiscal years.
- Revenue from operations grew at a Compound Annual Growth Rate (CAGR) of 27% over the past three years.
- Profitability:
- EBITDA margin for FY 2024 was 37.93%, compared to 36.70% in FY 2023.
- Net profit margin for FY 2024 stood at 22.5%, reflecting operational efficiency.
- Return Ratios:
- Three-year average Return on Equity (ROE): 48.6%.
- Return on Capital Employed (ROCE): 43.7%, indicating efficient use of capital.
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Strengths of Unimech Aerospace
- Advanced Manufacturing Capabilities:
- Expertise in high-precision engineering, ensuring superior product quality.
- Integration of digital technologies for enhanced production efficiency.
- Diverse Revenue Streams:
- Serves multiple industries, reducing dependency on any single sector.
- Strategic Client Relationships:
- Long-standing contracts with global aerospace and defence giants.
- Growth-Oriented Investments:
- Regular investments in R&D to develop cutting-edge technologies.
Risks and Challenges
- Dependence on Export Markets:
- A significant portion of revenue comes from international clients, making the company vulnerable to global market fluctuations.
- Raw Material Supply Risks:
- Dependency on specific raw materials could lead to supply chain disruptions.
- Competition:
- Faces competition from established players like MTAR Technologies and Paras Defence, which could impact market share.
- Economic Slowdowns:
- Any downturn in the aerospace or defence industries could affect demand for the company’s products.
Grey Market Premium (GMP)
The Grey Market Premium (GMP) is a key indicator of market sentiment toward an IPO. As of December 23, 2024:
- Unimech Aerospace shares are trading at a GMP of ₹480.
- This represents a 61.15% premium over the upper price band of ₹785.
A strong GMP indicates positive investor interest and the potential for good listing gains.
Subscription Status
On the first day of the IPO:
- The issue was subscribed 6% by 10:15 AM IST.
- Retail investors showed strong interest, reflecting confidence in the company’s prospects.
- Institutional and non-institutional investors are expected to contribute significantly in the coming days.
Expert Recommendations
Market analysts have mixed opinions about the IPO. Here’s a summary of their views:
- Positives:
- Robust financials and consistent growth.
- A well-established position in the aerospace and defence sectors.
- Favorable GMP, indicating strong listing prospects.
- Concerns:
- High dependency on export markets.
- Competitive landscape with established players.
Verdict: Analysts suggest that investors with a medium- to long-term investment horizon should consider subscribing to the IPO, given its strong fundamentals and growth potential.
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Should You Apply for Unimech Aerospace IPO?
The decision to invest in an IPO depends on individual investment goals, risk appetite, and market conditions. Here’s a quick summary to help you decide:
Reasons to Subscribe:
- Strong financial performance with consistent revenue and profit growth.
- Competitive advantage in high-precision engineering.
- Positive GMP indicates robust demand in the secondary market.
- Opportunity to invest in a growing aerospace and defence sector.
Reasons to Avoid:
- Exposure to global market risks due to high export dependency.
- Vulnerability to raw material supply chain disruptions.
- Competitive pressures from established players in the industry.
IPO – A Prudent Decision
Unimech Aerospace’s IPO offers an attractive opportunity to invest in a company with a proven track record and strong growth prospects in the aerospace and defence sectors. While the risks associated with export dependency and competition should not be ignored, the company’s strengths, such as advanced manufacturing capabilities and financial stability, make it a promising investment.
For investors seeking medium- to long-term gains, subscribing to this IPO could be a prudent decision. However, it’s essential to evaluate your financial goals and risk tolerance before applying.
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