Shares of electronic manufacturing services company Avalon Technologies made a muted debut on the stock exchanges on Tuesday, with the share price listing at a discount of 1.1% at ₹431 on the Bombay Stock Exchange (BSE), against the initial public offering (IPO) price of ₹436. On the National Stock Exchange (NSE), the stock opened flat at ₹436, the same as the issue price.
Post listing, the stock declined as much as 5.4% to hit a low of ₹412.3 on the BSE, while its market capitalisation slipped to ₹2,717 crore. A total of 15.7 lakh shares changed hands over the counter on the BSE and the NSE in the first half an hour of trade. Meanwhile, the BSE Sensex was trading 177 points lower at 59,734 levels, tracking subdued cues from global peers.
The muted listing of Avalon Technologies shares was in line with Street expectations as the company’s ₹865 crore public offer received a lukewarm response from investors. The offer, which opened between April 3-6, was subscribed 2.32 times on the back of strong bidding by qualified institutional investors on the final day of the issue. The quota reserved for qualified institutional buyers (QIBs) was booked 3.75 times, whereas the portion for non-institutional investors (NIIs) and retail investors was subscribed just 43% and 88%, respectively, of their allotted quotas. The company had reserved 75% of the offer for QIB, 15% for NIIs, and the remaining 10% for retail investors.
The price band was fixed at ₹415-436 and individual investors were allowed to apply for a minimum of 34 equity shares and in multiples of 34 shares thereafter. This means, the minimum application amount for retail investors was ₹14,824 per lot (34 shares), and the maximum is ₹1,92,712 for 13 lots (442 shares).
The ₹865 crore IPO of Avalon Technologies comprised a fresh issuance of shares worth ₹320 crore, and an offer for sale (OFS) of equity shares worth ₹545 crore by promoters and other shareholders. Of the ₹320 crore raised from 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.
The EMS company 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. Besides, the Chennai-headquartered company raised ₹389.25 crore from 24 anchor investors by allocating 8,927,751 equity shares at ₹436 per equity share. The anchor investors include Nomura, Goldman Sachs, Aditya Birla Sun Life Insurance Company, HDFC Life Insurance Company, Franklin India Mutual Fund, Ashoka India Opportunities Fund, HDFC Mutual Fund and WhiteOak Capital, and others.
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.
Established in 1999, Avalon 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. 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.
