Avalon Technologies IPO set to debut on BSE and NSE on 18 April. What to expect?

In a notification on Monday, NSE said, “The equity shares of the following company shall be listed and admitted to dealings on the Exchange w.e.f. April 18, 2023. Trading shall be in the Normal Market segment – Compulsory Demat (Rolling Settlement) for all investors.”

Ahead of the listing, A R Ramachandran, Co-founder & Trainer – of Tips2trades said, “Even though fundamentals are great in terms of profitability and return ratios, PE ratio of above 50 in the current environment looks expensive. Investors should wait for lower levels post listing to buy.”

The company launched its public offer from April 3rd to April 6th. The IPO comprised a fresh issue worth ₹320 crore and an offer for sale (OFS) aggregating to ₹865 crore.

The IPO’s price band was at a minimum of ₹415 per share and a maximum of ₹436 per share. Of the total 100% book building offer, 75% of the portion will be kept for QIBs, 15% reserved for NIIs, and 10% for RIIs.

On the last day of the IPO, Avalon received a subscription of 2.21 times cumulatively. QIBs category fully subscribed their portion by 3.57 times. However, the non-institutional investors and retail individual investors category did not fully subscribe as they saw a demand of 41% and 84% of their total reserved size.

Avalon plans to use proceeds from fresh issue for repayment of all or a portion of certain outstanding borrowings of itself and one of its subsidiaries Avalon Technology and Services. Also, the company plans to use fresh capital proceeds for funding working capital requirements and general corporate purposes.

Before the public offer, Avalon raised around ₹389.25 crore from 24 anchor investors.

Avalon Technologies is one of the leading fully integrated Electronic Manufacturing Services (“EMS”) companies with end-to-end operations in delivering box-build solutions in India in terms of revenue, with a focus on high-value precision-engineered products.

The company has seen a significant rise in its customer base to 81 in FY22 from 62 in FY21, increasing its order book to ₹11,902.46 million as of November 2022 from ₹9,182.32 million as of November 2021.

In their Avalon IPO note, Reliance Securities earlier said, “considering the healthy business prospects for the Indian EMS industry, company’s high return ratios and similar margins relative to peers and valuation comfort at 55.5x P/E on annualised FY23 financials.”

While Asit Mehta Investment Intermediates in their report said, “Avalon is engaged in the global supply of critical and specialized components to industries across the board with a major focus on clean energy and new product developments used in Automotive (EV’s), Aerospace, Defence and Hydrogen space. Favourable policy initiatives such as ‘Make in India’ program of GOI, leading to high customer retention and cost-efficient manufacturing. Further, Company stand to benefit from the tailwinds of Aatmanirbhar Bharat and the Production Linked Incentive Scheme (PLI Scheme) across verticals, which would help to reduce import dependence as well as position India as an export hub.”