Aluwind Architectural NSE SME IPO review (May apply)

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Review By Dilip Davda on March 24, 2024

•    The company is engaged in manufacturing and marketing of aluminium products used for façade and fenestration. 
•    It marked growth in its top lines for the reported periods, but bumper earnings from FY23 onwards raise eyebrows and concern over its sustainability. 
•    It is operating in a highly competitive and fragmented segment. 
•    Based on FY24 annualized super earnings, the issue appears fully priced. 
•    Well-informed investors may park moderate funds for the medium to long term rewards.

ABOUT COMPANY:
Aluwind Architectural Ltd. (AAL) is in the manufacturing and marketing of aluminium products primarily used for façade fenestration. currently, the company operates in the segment of manufacturing and installing a diverse range of aluminum products. This includes windows, doors, curtain walls, cladding, and glazing systems, all meticulously crafted to meet the unique needs of architects, consultants, builders, institutions, and corporations.

On the backing of its infrastructure, the company has successfully expanded its market presence, with products sold in cities across India, including Mumbai, Pune, Bangalore, Hyderabad, among others, the company demonstrates a widespread reach and a commitment to serving customers across the nation.

The company is dedicated to achieving excellence in product quality and has recently solidified its commitment through a strategic collaboration with Eternia, a cutting-edge product line from Hindalco (Aditya Birla Group). This collaboration positions the company as anchor partner for Eternia products in the MMRDA region. By aligning with this latest offering, the company not only reinforces its dedication to maintaining high-quality standards but also looks forward to establish itself as a player in delivering custom tailored solutions to its clientele in the fenestration industry.

The company aspires to lead the façade and fenestration industry, aiming to be at the forefront by delivering elegant products that contribute to enhancing the city's skyline. With a clear vision, it strives to redefine architectural landscapes and set new standards for aesthetic and functional excellence in the industry. As of September 30, 2023, it had 178 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 6600000 equity shares of Rs. 10 each at a fixed price of Rs. 45 per share to mobilize Rs. 29.70 cr. The issue opens for subscription on March 28, 2024, and will close on April 04, 2024. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.56% of the post-IPO paid-up capital of the company. The company is spending Rs. 2.75 cr. for the IPO process, and from the net proceeds of the IPO, it will utilize Rs. 20.45 cr. for working capital, and Rs. 6.50 cr. for general corporate purposes. 

The issue is solely lead managed by Corpwis Advisors Pvt. Ltd. Ltd., and Skyline Financial Services Pvt. Ltd. is the registrar of the issue. NNM Securities Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par, the company issued/converted further equity shares in the price range of Rs. 50 - Rs. 2349 per share between March 2008 and March 2022. It has also issued bonus shares in the ratio of 20 for 1 in March 2023, and 62 for 10 in January 2024. The average cost of acquisition of shares by the promoters is Rs. 0.33, Rs.1.63, Rs. 3.59, and Rs. 15.54 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 18.25 cr. will stand enhanced to Rs. 24.85 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 111.81 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 21.39 cr. / Rs. 0.77 cr. (FY21), Rs. 29.25 cr. / Rs. 0.79 cr. (FY22), and Rs. 49.01 cr. / Rs. 2.70 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 3.73 cr. on a total income of Rs. 41.43 cr. 

For the last three fiscals, it has reported an average EPS of Rs. 0.95, and an average RONW of 12.03%. The issue is priced at a P/BV of 5.40 based on its NAV of Rs. 8.33 as of September 30, 2023, and at a P/BV of 2.22 based on its post-IPO NAV of Rs. 20.28 per share.

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 15.00. Thus based on annualized bumper earnings for FY24, the issue appears fully priced. 

For the reported periods, the company has posted PAT margins of 3.61% (FY21), 2.72% (FY22), 5.53% (FY23), 9.01% (H1-FY24), and RoCE margins of 14.23%, 9.74%, 22.62%, 24.55% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Innovators Façade as their listed peer. It is trading at a P/E of 26.1 (as of March 22, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 1st mandate from Corpwis Advisors in the ongoing fiscal, it has no track records for the past mandates.

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