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The global aerospace industry is undergoing a remarkable shift, with the Maintenance, Repair, and Overhaul (MRO) market witnessing robust growth in emerging economies like India and China. Traditionally dominated by Western Europe and North America, the focus has now shifted to Asia, where burgeoning aviation markets are driving demand for innovative and precision-engineered solutions. This evolving landscape presents immense opportunities for companies like Unimech Aerospace and Manufacturing Limited, which is strategically positioned to capitalize on this growth with its high-precision aerospace and defence components.
As the aviation sector in Asia continues to soar, Unimech’s upcoming IPO serves as a gateway for investors to tap into this dynamic industry. Let’s explore what makes this IPO a potential game-changer.
In this blog, we’ll explore key aspects of the IPO, the company’s financials, a peer comparison, and whether it’s worth your investment.
Unimech Aerospace IPO is open for subscription from (20th Dec 2024) today onwards!
Unimech Aerospace IPO Details:
- IPO Open Date 23rd December 2024, Monday
- IPO Close Date 26th December 2024, Thursday
- Price Band ₹745 to ₹785 per share
- Lot Size 19 shares
- Face Value ₹5 per share
- Issue Size at upper price band ₹500 crore (Fresh Issue ₹250 crore and ₹250 crore)
- Listing exchanges NSE, BSE
- Cut-off time for UPI mandate confirmation by 5 PM on December 26, 2024
The tentative timeline for the IPO is as follows:
- Basis of Allotment 27th December 2024, Friday
- Initiation of Refunds (if not allotted) 30th December 2024, Monday
- Credit of Shares to Demat (if gets allotments of shares) 30th December 2024, Monday
- Listing Date 31st December 2024, TuesdayÂ
About the Company
Unimech Aerospace and Manufacturing Limited, incorporated in 2016, is an engineering solutions company specializing in manufacturing and supply of high precision & critical components to major OEMs (original equipment manufacturers) and their licensees worldwide for aerospace, defence, energy, and semiconductor industries. They are an export-oriented company with customers across the USA, Germany and the United Kingdom. They have two manufacturing facilities in Bangalore operating at a capacity utilization of ~95%. As of 30th September 2024, they have an order book of ₹80 cr, which would be fulfilled in 4-16 weeks. The company’s revenue is concentrated on the 10 customers. The net proceeds would be mainly utilized towards the purchase of plant & machinery and to fund working capital requirements.
The company is a key link in the global supply chain for global aerospace, defence, semi-conductor and energy OEMs and their licensees for the supply of critical parts like aero tooling, ground support equipment, electro-mechanical sub-assemblies and other precision engineered components. They generate the majority of the revenue from the aero-tooling equipment segment, where they offer ground support tooling equipment for OEMs and MROs (maintenance, repair & overhaul). Their product portfolio includes engine lifting and balancing beams, assembly, disassembly and calibration tooling, ground support equipment, airframe assembly platforms, engine transportation stands, mechanical & electro-mechanical turnkey systems, and precision components.
Let’s look at the revenue breakup.
Sector Outlook in India
The global aircraft maintenance, repair, and overhaul (MRO) business is critical to the safety, reliability, and efficiency of commercial aircraft. As the aviation sector expands due to increased air travel demand and fleet modernization programs, the aircraft MRO market grows and evolves in parallel.
Commercial Aircraft MRO (Maintenance, Repair, and Overhaul) activities are divided into four primary categories: engine maintenance, airframe maintenance, line maintenance, and component maintenance. In 2023, the Engine MRO segment generated 46% of total MRO revenue, with airframe maintenance following closely behind. This sector is well-established in regions such as North America and Europe. Europe is recognized as the second-largest market for aerospace products, particularly in the aero-tooling industry. Key players in the aero tooling and MRO sectors maintain a strong presence in the European market.
In 2022, the APAC region, particularly China and India, comprised approximately 30% of the global aircraft fleet. Developing economies are anticipated to see a quicker growth in fleet size, driven by the emergence of new low-cost carrier airlines in these markets. By 2042, the Asian region is projected to add around 11,925 aircraft, fueled mainly by demand for Low-Cost Carriers (LCCs) like IndiGo, which places bulk orders for aircraft.
Read our blog to learn more about the Indian Aviation Industry Ready to Take-Off: Sector Outlook and Investing Opportunities.
Financial Performance of the Unimech Aerospace IPO
Unimech Aerospace and Manufacturing Limited has displayed exceptional financial growth. Here are the key financial highlights for Unimech Aerospace and Manufacturing Limited:
- Revenue Growth: Unimech Aerospace and Manufacturing Limited saw a significant surge in revenue, from ₹36 crore in FY22 to ₹209 crore in FY24, reflecting a CAGR of 155%.
- EBITDA Margin: The company has demonstrated exceptional profitability with an impressive EBITDA margin of 37.9%.
- Net Profit Margin: Unimech’s net profit margins have consistently improved, reaching a commendable 28% in FY24.Â
These metrics demonstrate Unimech’s ability to maintain profitability while scaling operations effectively.
When compared to peers in the precision-engineering sector, Unimech Aerospace emerges as a strong contender. Dynamatic Technologies Ltd, MTAR Technologies Ltd, Azad Engineering Ltd, and Paras Defence And Space Technologies Ltd all lag in terms of profitability and operational efficiency. While Dynamatic Technologies leads in revenue at ₹1,429 crore, its EBITDA margin of 11.2% is significantly lower than Unimech’s. Similarly, MTAR Technologies and Azad Engineering have higher P/E ratios of 137.6x and 142.1x, respectively, indicating a premium valuation compared to Unimech’s 68.7x. Unimech also outshines in ROE and ROCE, standing well above industry averages and making it an attractive investment option.
Objectives of the Issue
Unimech Aerospace and Manufacturing Ltd. is conducting an IPO to raise ₹500 crore, comprising ₹250 crore as a fresh issue and ₹250 crore through an offer for sale (OFS). The company proposes to allocate the net proceeds of the fresh issue to the following purposes:
- Financing capital expenditure for expansion via the acquisition of machinery and equipment.
- Supporting working capital needs.
- Investing in its material subsidiaryÂ
These measures reflect Unimech’s commitment to long-term growth, enhanced operational efficiency, and sustained value creation for its stakeholders.
Let’s now look at the risk factors of Unimech Aerospace IPO.
Risk Factors
While the Unimech Aerospace IPO appears promising, investors should consider the following risks:
- The company’s revenue relies on a few key customers. Losing any could significantly affect business and financial health. In FY24, revenue from the top 10 customers reached ~99%, with the most significant contributing ~59% of revenue.
- They manufacture aero engine and airframe tooling products. Changes in the aerospace sector, which are influenced by regulatory shifts and competitive technologies, could impact their business. Their success depends on adopting new technologies and developing products in a timely manner.
- They procure raw materials, including standard parts, from third parties under purchase orders, typically without firm supply commitments. Lacking long-term contracts at fixed prices and needing a steady supply may complicate resistance to price increases suppliers.
- A change in tariff & non-tariff barriers in countries where they import raw materials and export their products may affect the performance.
Should you subscribe to Unimech Aerospace IPO?
Unimech Aerospace’s IPO is an opportunity to invest in a company operating in a high-barrier, niche sector with immense growth potential. The aerospace and defence industry is witnessing strong tailwinds due to increasing demand for aircraft and maintenance services, especially in Asia-Pacific. While the company faces risks such as high client concentration and exposure to geopolitical uncertainties, its robust financial performance, market positioning, and strategic expansion plans provide a compelling investment case.
Before investing in the Unimech Aerospace IPO, you should carefully consider both the potential benefits and the associated risks. In this blog, you will get an in-depth analysis of the main advantages and possible drawbacks of this investing opportunity. The Unimech Aerospace IPO has received a “Good” rating from StockEdge’s expert panel, indicating that the chance is balanced and cautious.
For more detailed information, we’ve created a comprehensive Unimech Aerospace IPO Note, which includes a deep dive into the company’s financials and a SWOT analysis, helping you understand its growth potential.
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