Aether Industries locked at upper circuit after listing at 10% premium

The stock moved higher to Rs 776.75, 21 per cent higher against the issue price of Rs 642 per share

Aether Industries' shares were locked at the upper circuit on Friday, after debuting at Rs 706 apiece on the BSE, a 10-per cent premium over its issue price of Rs 642. The stock opened at Rs 704 on the National Stock Exchange (NSE).

At 10:02 AM, the shares were 21 per cent higher against the issue price, at Rs 776.75, with only buyers on the counter of the specialty chemical manufacturer. A combined 3.8 million equity shares had changed hands and there are pending buy orders for 1.2 million shares on the NSE and BSE, exchange data shows. In comparison, the S&P BSE Sensex was up 1 per cent at 56,387 points.

The Rs 800-crore initial public offer (IPO) was subscribed 6.26 times. The qualified institutional buyers (QIBs) category was subscribed 17.57 times, the non-institutional investor’s category was subscribed 2.52 times, and the retail investor’s category was subscribed 1.14 times.

Aether plans to utilise Rs 627 crore of fresh issue to fund capital expenditure requirements of Greenfield projects, repayment of outstanding borrowings, and general corporate purposes.

The Gujarat-based company focuses on producing advanced intermediaries and specialty chemicals that involve complex and differentiated chemistry with technology as core competencies. Analysts believe that Aether's multiple chemistry competencies to use for a wide array of products makes it a distinguished market player than other chemical companies.

According to Frost & Sullivan, Aether’s revenue for its key products has grown much faster than the industry highlighting that it is able to take away market share from its competitors, which are mostly in China.

"The company benefits from the established relationships with multinational, regional and local customers. In particular, the company proposes to introduce new products with varied applications across industries. The company also is looking to connect with existing and potential customers where it can support them with its CRAMS and contract / exclusive business models," IIFL Securities had said in IPO note.

While the issue was priced at a P/E of 72.30 based on annualized FY22 numbers, Aayush Agrawal, Senior Analyst, Swastika Investmart believes that the company deserves this premium multiple due to its phenomenal growth prospects. Post listing, long-term investors may accumulate the stock, he suggests.

Analysts at ICICI Securities, too, said Aether is a niche player in the speciality chemical business and enjoys dominating market share in few select products with high margins. However, they opine that the valuations (~58.9x EV/EBITDA and ~72.4x P/E for 9MFY22 (annualised)) look demanding at the upper price band.

"The company derives a major chunk of revenues from marquee customers without having long term contracts with all of these customers. The dependency on certain industries for significant portion of sales and dependency on certain export incentives," the brokerage firm had said in IPO note.