Ahlada Engineers IPO Review: Should you Invest?

Ahlada Engineers IPO opened on September 11, 2018 and has planned to raise Rs 51 crore with the issue of 34.05 lakh equity shares.

Ahlada Engineers Ltd is in the manufacturing of clean room equipment and stainless steel furniture for for customers in the pharmaceutical, biotechnology and food industries.

The company had started producing steel doors and the matching steel windows in the wooden finish, intially in small quantities in 2013. The company has 3 manufacturing facilities along with one assembling unit and stock yard, with an area measuring 34,211 square yards located on the outskirts of Hyderabad.

Investment Rationale

• Tata Steel had signed a master manufacturing and supply agreement (MMSA) with Ahlada in August last year for the procurement of approximately 1.2 million doors over the period of four years, with an option to renew the contract for further four years. The product will have a touch and feel similar to wooden door and this product would be exclusively marketed by Tata Steel under the brand name ‘Tata Pravesh‘.
• Tata Steel has spot the potential of its product and given their demand. Therefore, the company has decided to completely switch to wood finish doors and windows manufacturing. For this, the company had planned to ramp up the capacity to 30,000 doors per month as per the supply agreement.

Purpose of the issue

The objects of the IPO are:

1. The net proceeds from Issue will be utilized for the repayment of certain loans that are identified and are taken from lenders and directors
2. Some parts of the funds will be used for the purchase of machinery or equipment
3. Working Capital requirements
4. The listing of Equity Shares is expected to enhance the company’s brand name and provide liquidity to the existing shareholders.
5. Offer related expenses.
6. General expenses of the corporate.

Ahlada Engineers IPO Detail

• Issue Open: September 11, 2018 – September 18, 2018
• Issue Type: Book Built Issue IPO
• Issue Size: 3,405,000 Equity Shares of Rs 10 aggregating up to Rs 51.08 Cr
• Issue Price: Rs 147-Rs 150 Per Equity Share
• Market Lot: 1000 Shares
• Minimum Order Quantity: 1000 Shares
• Listing At: NSE SME
• Credit of Shares to the Demat Account: September 25, 2018
• Date of listing of IPO Shares: September 27, 2018

Valuation – Should you Invest

Ahlada Engineers Ltd  have gradually expanded their manufacturing facilities and during the past decade, have significantly expanded the facilities to its current form and capacity.

Currently, the company has an installed capacity of manufacture 11,000 doors per month. The company has grown its net profit of Rs 327.29 lakhs to Rs.809.01 lakhs in FY 18. The P/E post issue will be 23.96 and has no peers. Only risk averse long term investors may “subscribe” for Ahlada Engineers IPO.

Disclaimer: Above article reflects author’s personal opinion and not the opinion of financeminutes.com. Readers are advised to perform their own research before investing.