Avalon Technologies IPO: 10 things to know about this public offer

1) Company Overview
Avalon is a fully integrated electronic manufacturing company that offers end-to-end service solutions. The company has 12 manufacturing units located across the US and India. Some of its key clients include Kyosan India, Zonar Systems Inc, Collins Aerospace, and eInfochips, among others. The company’s other capabilities include cable assembly and wire harnesses, sheet metal fabrication, machining, magnetics, and injection molded plastics.

2) Industry Overview
The electronics manufacturing services (EMS) market in India was valued at Rs 1.46 lakh crore in FY22 and is expected to grow at a CAGR of 32.3% to reach a value of Rs 4.5 trillion by FY26.

3) Issue Structure and Size
The IPO size has been reduced to Rs 865 crore from Rs 1,025 crore earlier as the company completed a pre-IPO placement of Rs 160 crore. The initial share sale comprises Rs 320 crore from the fresh equity issue and an Offer For Sale (OFS) of shares up to Rs 545 crore by promoters and existing shareholders.

4) Selling Shareholders
Under the OFS, promoters Kunhamed Bicha and Bhaskar Srinivasan will sell equity shares aggregating up to Rs 131 crore and Rs 172 crore, respectively. Other selling shareholders include T P Imbichammad and Mariyam Bicha, part of the promoter group.

5) Financial Performance
For the period ended November 2022, the company recorded revenue of Rs 584 crore, while profit after tax (PAT) stood at Rs 34 crore.

6) Objects of the Offer
The company said proceeds from the fresh issue would be used towards debt payment, funding working capital requirements, and general corporate purposes.7) Booking-Running Managers
JM Financial, DAM Capital Advisors, IIFL Securities and Nomura Financial Advisory and Securities (India) are the merchant bankers for this IPO.

8) Offer Structure
About 75% of the issue is reserved for qualified institutional buyers (QIBs), and 15% of the offer is reserved for non-institutional investors. The remaining 10% of the issue is reserved for retail investors.

9) GMP and Price Band
According to market sources, the company’s shares are being enquired for a premium of Rs 25-30 in the unlisted market. The company is yet to announce the price band for the IPO.

10) Risk Factors
The company sources its raw material from suppliers, primarily on a purchase order basis, who may not perform their contractual obligations in a timely manner or at all. Any hike in raw material costs may adversely affect the business and financial performance. The company is also dependent on a few customers for a major portion of its revenues.