Avalon Tech sets price band at ₹415-436 per share for its ₹865 cr IPO

Electronic manufacturing services firm Avalon Technologies (Avalon) on Tuesday said it has fixed a price band of ₹415-436 a share for its ₹865 crore initial public offering (IPO). The primary share sale, which is a mix of fresh issue and offer for sale, will open for public subscription on April 3 and conclude on April 6, the company announced. The bidding for anchor investors will open on March 31, while share allotment will be done on April 12 and credit of shares will be on April 17, as per the company. The stock will list on domestic stock exchanges – the BSE and the NSE – on April 18.

The Chennai-headquartered EMS company has cut its IPO size to ₹865 crore from ₹1,025 crore planned earlier after it raised ₹160 crore in the pre-IPO placement, which took place between October 2022 and February 2023. The issue comprises fresh issue of equity shares aggregating up to ₹320 crore and an offer for sale (OFS) of equity shares aggregating up to ₹545 crore.

The OFS will see the sale of shares to the tune of ₹131 crore by Kunhamed Bicha, up to ₹172 crore by Bhaskar Srinivasan, up to ₹10 crore by TP Imbichammad, up to ₹10 crore by Mariyam Bicha, up to ₹75.50 crore each by Anand Kumar and Luquman Veedu Ediyanam, and ₹65 crore by Sareday Seshu Kumar.

In a pre-IPO placement, Avalon raised ₹60 crore from UNIFI Financial Private Limited (UNIFI), ₹60 crore from Ashoka India Equity Investment Trust, and ₹40 crore Acorn Fund.

Of the ₹320 crore fresh issue,  Avalon proposes to utilise ₹145 crore towards prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company and one of its material subsidiaries, Avalon Technology and Services Private Limited (ATSPL). As of January 2023, the consolidated outstanding borrowings of Avalon Technologies stood at ₹324.12 crore.

Besides, the company will use ₹90 crore to fund the working capital requirements of the company and meet general corporate purposes.

For the financial year 2021-22 (FY22), the company’s total income rose to ₹851.65 crore from ₹695.90 crore in the previous fiscal. The net profit for the year surged to ₹68.16 crore compared with ₹23.08 crore a year ago. On the operational front, EBITDA margin improved to 11.6% from 9.58% a year ago.

Avalon, promoted by Kunhamed Bicha and Bhaskar Srinivasan, delivers box build solutions, with a focus on high value precision engineered products. Its key customers include Kyosan India, Zonar Systems Inc., Collins Aerospace, e-Infochips, The US Malabar Company, Meggitt (Securaplane Technologies Inc) and Systech Corporation, with whom it has had relationships for more than seven years. Customers include Faiveley Transport Rail Technologies, TransDigm Technologies, Zonar Systems Inc., Collins Aerospace, Caire Inc, e-Infochips, Haas Automation, TMEIC, and Ohmium India.

Ahead of the IPO, Avalon has acquired a new manufacturing facility spread over a total built up area of 93,552 sq. ft. in the Special Economic Zone (SEZ), Chennai. The Chennai-headquartered company intends to continue using this model as demonstrated by the inclusion of a new surface-mount technology (SMT) line at Atlanta, Georgia for expansion.

Avalon will increase its capacity for PCBA (printed circuit board assembly) and Box build. From fiscal 2020 to fiscal 2022, it has increased the aggregate SMT production lines of the company’s manufacturing facilities from 8 to 10, and the total installed SMT capacity from 244 million component placement per year to 366 million component placement per year. During the eight months ended November 30, 2022, Avalon increased the number of SMT lines to 11 with a corresponding increase in component placements per year to 322 million component placements per year.

Over the last two years, Avalon introduced three new SMT lines at Atlanta, Bangalore and Chennai as part of its ongoing commitment to ensure productivity improvement.

Avalon has 12 manufacturing units located across the United States and India: one unit in Atlanta, Georgia, one unit in Fremont, California, seven units in Chennai, Tamil Nadu, one unit in Kanchipuram, Tamil Nadu and two units in Bengaluru, Karnataka.