The IPO of Unimech Aerospace and Engineering Limited is worth ₹ 500 thousand crores. It is coming with backing from entities like Steadview Capital, ValueQuest Scale Fund and private equity firm Evolence India. This is an opportunity that gives you a chance to be a part of India's aerospace and defense growth story. Unimech provides an effective solution for aviation, defence, space and industrial sectors. The purpose of this article is to tell you about this company and its IPO.
For this we will understand these 5 categories-
1. Company's IPO details
2. Business Overview
3. Strengths and Weaknesses
4. Peer Valuations
5.Financials
1. Company's IPO details
The size of the IPO of Unimech Aerospace is ₹500 crore. In which the fresh issue is Rs 250 crore and the offer for sale is Rs 250 crore. Their price band is between ₹745 to ₹785 and the lot size is 19 shares with a face value of ₹5 per share i.e. an investor will have to invest at least ₹14915 to participate in this IPO. This IPO will be open from 23 December to 26 December. The net proceeds of the Offer for Sale will go directly to the selling shareholders and the net proceeds generated from the fresh issue will be utilized as follows. ₹36.36 crore to fund capital expenditure to purchase machinery and equipment. ₹25.28 crore for working capital funding of the company and ₹128.6 crore for investment of material subsidiary. In which Rs 43.89 crore is for purchasing machinery and equipment. Rs 44.71 crore to fund Working Capital. Rs 40 crore includes repayment or prepayment of loan and the rest for general corporate purposes.
2. Business Overview
First let us understand their industry. Manufacturing plays a very important role in India's overall GDP contribution. Its share in real GDP was 15 percent in 2022, which is expected to increase to 22 percent by 2030. The aim of India's Make in India program is to boost the manufacturing sector. Especially in critical areas like aerospace and defense. Big brands like Foxcom, Mercedes-Benz, Oppo and BMW have set up their manufacturing and RND centers in India, which are creating a strong industrial base. To support this, PLI (Production-Linked Incentive) scheme is making manufacturing more competitive. Due to which exports increase and investment comes in key sectors of the economy. Its main target is to reduce import dependency and make India a global manufacturing hub. Also, China Plus One policy and infrastructure improvement further strengthen this vision. Rapid growth is also taking place in aviation. Low cost carriers have made travel affordable. In which LCC has 30 to 35 per cent share in Europe and North America. Whereas IndiGo's market share in India is 54.7 percent and by 2030, air travel passengers in India can reach 300 million. Countries like India are developing their own fighter jets like HAL, Tejas, Combat Aircraft. Which promote Make in India initiative and reduce import dependency. All these trends are taking India in the direction of sustainable and innovative growth and are boosting many such factors to increase the growth of this industry.
Unimech Aerospace and Manufacturing Limited was incorporated in 2016. It is a global high precision engineering solutions company. It manufactures complex products for the aerospace, defense, energy and semiconductor industries and offers build-to-print and build-to-specification services. Which includes machining, fabrication assembly, testing and client specific product development. Their product portfolio ranges from engine lifting beams, calibration tooling, ground support equipment, airframe assembly platforms and electro mechanical turn key systems.
Capabilities
Design and Engineering:- With this, they create prototypes, manufacturing friendly designs and serviceable designs using high end design software. The engineering team manages 2D to 3D modeling, detailing, process planning, stage drawings, and inspection planning.
Manufacturing:- In manufacturing they use processes like turning, milling, double column milling, electro discharge machining, and grinding.
Fabrication and Assembly:- Can handle assemblies up to 10 meters long and up to 3 meters diameter, with 3000 components per assembly. Techniques such as laser marking, stenciling and engraving are used.
Testing Capabilities :- 70 Tons Load Testing, 420 Bar Pressure Testing, Non Destructive Test. etc.
Electrical and Electronic Integration:- Handles wire harness, control panel development, component qualification and testing, and assembly.
If you look at their revenue stream, 99.35% of their revenue is generated from aerospace, so from this you would have understood a lot about their business and sector.
3. Strengths and Weaknesses
1. Strengths
Advanced Manufacturing Capabilities:- Unimech manufactures complexation products. They have build-to-print and build-to-specification capabilities for the aerospace, defense, energy and semiconductor industries.
Build to Print – Manufacture tools and components to specific designs. Between 2022 and 2024, 2356 SKUs will be made in touring and 624 SKUs will be made for machine parts.
Build to Specification – Design and manufacture products according to the client's specifications. This is enabled by their in-house manufacturing capabilities, processing knowledge and network of vendors. To provide proper value added end to end solutions.
Robust Vendor Ecosystem and Strong Subcontractor Management with Proven Execution Capabilities:- Unimech Aerospace's robust vendor ecosystem and strong subcontractor management is the core of the company's operational strength. Their vendor network is made up of 42 vendors and 118 machines. Which efficiently manages high mix low volume production. Their well-defined ecosystem established with subcontractors is quite effective. Which helps in focusing on critical manufacturing processes. Inhouse vendors and subcontractors are kept under direct supervision, to assure quality and timely delivery. This strong ecosystem insures flexibility, scalability and risk mitigation to enable rapid adjustments as per production demands. The role of Unimech's supply chain management team is also quite impressive. Who manages the training and growth of subcontractors.
Experienced and Complete Management Team with Strong Implementation Skills and Operational Effectiveness:- The management team of Unimech Aerospace is highly experienced and qualified. In which the total experience of the promoters is more than 90 years. Some promoters like Anil P with more than 20 years of experience in manufacturing, Mani P with more than 19 years of experience in business operations, Rama Krishna Kamojala with more than 13 years of experience in financial and sectoral fields, Pritam SV with more than 19 years of experience in manufacturing and Rajnikanth Bala Raman has more than 26 years of experience in software engineering. In, there are people who are involved in segments like engineering design, manufacturing, product planning. Their team members have worked with companies like Wipro and Bosch. This experience team which is supported by 164 engineers. Focuses on innovation, automation and process design. Ensuring Operation Effectiveness and Continuous Growth in Technology and Manufacturing.
Track Record of Strong Financial Performance:- Unimech Aerospace has shown exceptional growth in its financial performance. In which a CAGR of 139.7 was recorded between FY 2022 to 2024. The total revenue of the company was Rs 120.65 crore in FY 2024. Their EBITDA margin reached 44.47 in FY 2024. His PAT increased from Rs 3.39 crore to Rs 58.13 crore from FY 2023 to 2024. Which reflects their strong financial track record and also makes it the fastest growing company.
2. Weaknesses
Prone to Adverse Effects in the Aerospace Industry:- A major portion of Unimech Aerospace & Manufacturing Limited's revenue comes from the aerospace sector alone, 98.25 percent as of September 30, 2024. 99.35 fiscal 2024, 94.7 fiscal 2023 and 95.84 fiscal 2022. Heavy reliance can become a major weakness for them. If there is any slight change in the aerospace sector like slowdown or reduced demand. So this will have a direct impact on their business, operations and financial health. The lack of diversification makes Unimech's revenue sources vulnerable. Which is a big risk factor for long term growth and stability.
Heavily Dependent on Top 10 Customers:- Unimech is heavily dependent on its top 10 customers which accounts for 94.62% of its total revenue for the last 6 months till 30 September 2024. Contributing 96.8% fiscal 2024, 93.88% fiscal 2023 and 88.97% fiscal 2022. This dependency can become a big weakness for them. If we lose any one of these customers or there is a significant reduction in their purchases. So this will have a direct impact on their business, operations and financial stability. Lack of diversified customer base is a major risk for Unimech. Which can affect their long term growth and results.
Dependence on Cash Flows and Operating Income Coming in from their Subsidiary Inomac :- Unimech Aerospace and Manufacturing Limited is highly dependent on its material subsidiary Inomac. Which contributes a major part of their total consolidated revenue. Inomak which is located near Bangalore International Airport in SEZ i.e. Special Economic Zone. Manufactures products for the aerospace sector. During the six months ending September 30, 2024, Inomac's revenue constituted 83.46% of Unimech's total consolidated revenue. Which was 89.35% in fiscal 2024, 73.5% in fiscal 2023, 68.06% in fiscal 2022. If Innomac's revenues decline or operations are impacted. So this will have a direct impact on Unimech's consolidated revenue and profitability. If Innomac's shareholding is diluted or disassociated in the future. So this could become a significant risk for Unimech's business and financial stability.
Their Products Require Returns And Rework :-Unimech Aerospace & Manufacturing Limited's products may require returns and rework which could have a direct and significant impact on their revenues, profitability and reputation. If the Products have defects, malfunctions or deviations from customer specifications. So the company has to take them back or repair them. Which can incur additional costs and revenue loss. Most importantly, if product quality is not consistent, customer trust and loyalty may diminish. Which can become a big challenge for future sales and market position. Maintaining quality standards is essential and if these are compromised, they can have a negative impact on the overall business and operations of the company.
4. Peer Valuations
Its listed competitors are Mtar Technologies Limited, Azad Engineering Limited, Paras Defense and Space Technologies Limited, Dynamic Technologies Limited and Data Patters India Limited.
Friends, from this chart it appears that there is only Unimech, which has a wide product portfolio. It covers areas such as aerospace and defense, energy, oil and gas, precision manufacturing, components and ground support tooling equipment.
The estimated market cap of Unimech is Rs 3992 crore and it has the lowest market cap as compared to its competitors. At the forefront is Data Pattern India Limited with a market cap of Rs 14,142 crore. Azad Engineering ₹10.037 crore and then Dynamic Technologies ₹5,635 crore. The most comparable companies with Unimech are Mtar Technologies Limited, Paras Defense Limited and Dynamic Technologies Limited in terms of market cap. Dynamic's EPS is ₹34.49 i.e. Earnings per Share is highest among its peers and Unimac's EPS is ₹8.49 which is quite high among its peers. The leader in Revenue from Operations is Dynamic Technologies Limited at ₹707.7 crore, followed by Mtar at ₹318.45 crore and then comes Azad Engineering at ₹209.94 crore. Unimech's revenue is ₹120.65 crore. According to PE ratio, all the companies are at very high PE. Almost all are above 200 and if we look at the estimated PE ratio of Unimac, it is 64.37 which means investors can consider it an undervalued stock.
Now if we compare the return on net worth of all these companies till September 2024, it is ahead of Unimac at 9.92% and all the other competitors are below 5%. This shows that Unimech is able to utilize its shareholders' equity quite well to generate returns. If we look at the generosity, it is also relatively less in the case of Unimac. Their borings till 30 September 2024 are 74.7 crores. Which is quite low in comparison to many of its competitors. Friends, from this chart it is clear that Unimech is the only company which has a wide product portfolio. It covers areas such as aerospace and defence, energy, oil and gas, precision manufacturing, components and ground support tooling equipment.
The estimated market cap of Unimech is Rs 3992 crore and it has the lowest market cap as compared to its competitors. At the forefront is Data Pattern India Limited with a market cap of Rs 14,142 crore. Azad Engineering ₹10.037 crore and then Dynamic Technologies ₹5,635 crore. The most comparable companies with Unimech are Amtar Technologies Limited, Paras Defense Limited and Dynamic Technologies Limited in terms of market cap. Dynamic's EPS is ₹34.49 i.e. Earnings per Share is highest among its peers and Unimac's EPS is ₹8.49 which is quite high among its peers. The leader in Revenue from Operations is Dynamic Technologies Limited at ₹707.7 crore, followed by Amtar at ₹318.45 crore and then comes Azad Engineering at ₹209.94 crore. Unimech's revenue is ₹120.65 crore. According to PE ratio, all the companies are at very high PE. Almost all are above 200 and if we look at the estimated PE ratio of Unimac, it is 64.37 which means investors can consider it an undervalued stock.
Now if we compare the return on net worth of all these companies till September 2024, it is ahead of Unimac at 9.92% and all the other competitors are below 5%. This shows that Unimech is able to utilize its shareholders' equity quite well to generate returns. If we look at the generosity, it is also relatively less in the case of Unimac. Their borings till 30 September 2024 are 74.7 crores. Which is quite low in comparison to many of its competitors.
5.Financials
If we understand the financials then first of all look at their superb two year sales compound annual growth rates CAGR which is 14.11% and two years PAT CAGR which is 314.1% which shows the company's good financial health, operational efficiency and strong business prospects. Revenue from Operations were Rs 36.34 crore which FY It will become 94.16 crore in 2023 and it will become 28.77 crore in FY 2024. Due to a low starting FY 2022 base, they have achieved a short term seemingly high Caesar. The credit for this goes to their increased annualized capacity. Which was 99,810 hours in FY 22 and will increase to 222,990 hours by FY 2024 and the company has achieved more than 90 percent capacity utilization in the last three fiscal years. Which is giving good contribution in increasing their revenue. Besides, their purchase orders and business volumes have also increased significantly. Purchase orders from top 10 customers have almost doubled from 2022 to 2024. There were 1672 in fiscal 2022 and it will become 3157 by fiscal 2024. Due to which product volumes increased and revenue also increased. The return on net worth for FY 2024 is 53.53 percent which shows that the company is able to efficiently utilize its shareholder equity. Return on Capital Employed is 54.36 percent. It shows the company's ability to generate returns from capital investment. This is a positive sign of operational efficiency. Even in the six month period till September 2024, the total income of this company is Rs 127.57 crore and the restated profit is already Rs 8.68 crore. Their current debt to equity ratio is 0.32 which is low and can be considered a positive sign.
You can view the current GMP of Unimech Aerospace & Manufacturing.
But here is a reminder that GMP of any company should not always consider only the speculative share price happening in the market.
Link to RHP (Red Heading Prospectus) of Unimec Aerospace for your research RHP Link
Read this also : The first IPO of 2025 is going to open on January 6, in which the price band has been fixed at Rs 140.
Let us tell you that this article is only for educational purpose. Any information given in this article is not a recommendation to buy or sell.
BY ANIL PAAL
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