Unimech Aerospace and Manufacturing Limited IPO: Check IPO Date, Lot Size, Price & Details

Introduction:

The company is an engineering solutions company specializing in the manufacturing and supply of critical parts such as aero tooling, ground support equipment, electro-mechanical sub-assemblies, and other precision-engineered components for aerospace, defense, energy, and semiconductor industries. It possesses “build to print” capabilities, wherein it manufactures products based on client designs, and “build to specifications” capabilities, wherein it assists clients in designing the products to be manufactured based on specifications. The company supplies high-precision and critical components to major OEMs and their licensees worldwide.

The company product portfolio includes, inter alia, 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. The salient features of its products are complexity and a “high-mix, low volume nature”, characterized by high-mix products which are not mass manufactured. It offers a wide range of products (“SKUs”) but produce relatively small quantities of each based on specific customer requirements. Its ability to efficiently manufacture even single units of a particular SKU provides it with the flexibility to optimize pricing and maintain high-profit margins. Factors such as on-time delivery and product quality significantly influence its pricing strategy.

IPO Details:

Objectives of Issue:

• Funding of capital expenditure for expansion through purchase of machineries and equipment by the Company
• Funding working capital requirements of the Company
• Investment in the Material Subsidiary for: (i) purchase of machineries and equipment; (ii) funding its working capital requirements; and (iii) repayment / prepayment, in full or part, of certain borrowings availed by their Material Subsidiary
• General corporate purposes.

Key Strengths:

• Catering to Customer Needs- The company is a global leader in high-precision engineering solutions, specializing in the production of complex tools and components through "build-to-print" and "build-to-specifications" models. Under the build-to-print approach, the company manufactures products based on detailed designs and drawings provided by clients, while the build-to-specifications model involves collaborating with clients to design products tailored to their specific requirements and needs. This specialized approach enables the company to deliver customized solutions and achieve higher profit margins on its offerings.

• High Barrier to Entry- The company operates in a niche market characterized by a complex production process and an extended client approval cycle, creating significant entry barriers for new competitors. Establishing manufacturing facilities for the company's products requires substantial investment, technical expertise, and time. Furthermore, once a vendor meets a customer's specific requirements and is onboarded, it becomes challenging for the customer to switch to an alternative supplier.
  Building relationships with original equipment manufacturers (OEMs) is a prolonged and intricate process, often spanning several years, and requires a combination of technical proficiency, competitive pricing, and adherence to rigorous quality and delivery standards. Additionally, scaling operations in a high-mix, low-volume manufacturing environment demands a skilled workforce, robust infrastructure, and operational precision. These factors collectively make market entry highly challenging for potential competitors.

Risks:

• Overdependence on Top 5 Customers—In the past 3 years, the company has generated almost 90% of the revenue from its top 5 customers, which creates overdependence on them. Any loss of customer could severally affect the company's revenue-earning capability.

• Foreign Currency Exposure- Since the company is majorly export-oriented, it generates more than 95% of its revenue from outside India. Since revenue is booked in the export country currency, such transactions give rise to foreign currency exposure. Any adverse fluctuations in the exchange rate could severally affect the profitability of the company as the company does not have any hedging policy to protect from currency fluctuations

• Aerospace Sector Dependence- Our operations are primarily focused on the production of aero engine tooling and airframe tooling, making the company's performance closely tied to the aerospace sector, which accounts for over 95% of our revenue. Consequently, any regulatory or policy shifts, technological advancements, or unforeseen disruptions within the aerospace industry could have a substantial impact on the company's revenue.

Financial Snapshot:

KPI comparison with Industry Peers

Conclusion:

From an industry perspective, commercial aircraft deliveries are projected to grow at a compound annual growth rate (CAGR) of 7.5% over the next three years. The tooling and precision industry, in which the company operates, is also poised for healthy growth. Specifically, the aerospace tooling segment is expected to expand at a CAGR of 17% over the next four years, while the MRO tooling segment is anticipated to grow at a 3% CAGR during the same period.

A comparative analysis of key performance indicators (KPIs) highlights the company's strong position, as it outperforms its peers across major metrics. However, a review of price-to-earnings (PE) ratios of the peers indicate that the company may be slightly undervalued with the industry average PE standing at approximately 100. Given its optimistic growth outlook and solid fundamentals, the company presents a compelling long-term investment opportunity.