Aether makes great debut

Aether Industries made a very good debut today. As against the IPO price of Rs.642, the stock got listed on the BSE at Rs.706.15, a premium of 10%; it went on to further hit the 10% UC of the day at Rs.776.75.

The IPO was subscribed 6.26x and this was thanks mainly to the QIBs whose portion was subscribed 17.57x, HNIs was at 2.52x and retail investors at 1.14x.

The company is India’s sole and the world’s largest producer (by volume) of chemicals like 4MEP, HEEP, NODG, T2E, used in pharmaceutical and agro-chemical sector.

In our IPO Analysis, we had found the IPO to be too expensive – based on FY23E and FY24E earnings, PE multiple works out to 54x and 40x respectively, making the issue more than fully-priced, as two-year forward growth is being ‘front-loaded’ to present price.

Our conclusion - While company offers healthy growth visibility, valuation lacks adequate margin of safety as: waning investor interest in pharma sector, accounts for 2/3rd of company revenue. Also PE multiples of chemical sector sky-rocketed during covid but now face risk of contraction, similar to ongoing correction in IT stocks, despite earnings growth.