Aztec Fluids & Machinery coming with IPO to raise upto Rs 24 crore

Aztec Fluids & Machinery 

• Aztec Fluids & Machinery is coming out with initial public offering (IPO) of 36,00,000 shares of Rs 10 each in a price band Rs 63-67 per equity share.  
• The issue will open for subscription on May 10, 2024 and will close on May 14, 2024.
• The shares will be listed on BSE SME Platform.
• The face value of the share is Rs 10 and is priced 6.30 times of its face value on the lower side and 6.70 times on the higher side.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Rekha Vishal Jhanwar. 

Profile of the company

Established in 2010, the company provides coding and marking solutions to a diverse range of industries such as personal care, food & beverages, pharmaceuticals, construction materials, cables, wires & pipes, metals, automotive & electronics, agrochemicals, chemicals & petrochemicals etc. Its product portfolio includes (i) printers such as continuous inkjet printers (CIJ), Thermal Transfer Over printers (TTO), Drop on demand printers (DOD), NIJ printers (i.e. piezoelectric printers) and laser printers (ii) printer inks and (iii) printer consumable items i.e. makeup and cleaning solvents. Its range of products allows its customers to print vital variable information like batch number, date, price, logo, brand, size, barcodes, promotional codes, meter marks, special marks etc. on the products such as steel tubes, aluminum panels, G.I. sheets, laminates, glass, PVC, plywood, woven sac, corrugated boxes, plastics and packing materials. 

Since 2015, the company is an exclusive distributor of Lead Tech (Zhuhai) Electronic Co., China for CIJ Printers, TTO Printers and a range of associated equipment and accessories for various countries such as India, Sri Lanka, Nepal, Bhutan, Bangladesh, Kenya and Nigeria. The other type of printers such as DOD and NIJ are imported by it from other foreign suppliers. After import of printers, based on the customers’ requirements it carry out certain functions such as printer configuration & stand installation on printers. It also carries the necessary testing and trial run to check the desired output of printers. 

Proceed is being used for:

• Funding of the proposed acquisition of equity shares of Jet Inks.
• Repayment of a portion of certain borrowing availed by the company.
• General Corporate Purpose.

Industry overview

India’s Capital Goods manufacturing industry serves as a strong base for its engagement across sectors such as Engineering, Construction, Infrastructure and Consumer goods, amongst others. It accounts for 27% of the total factories in the industrial sector and represents 63% of the overall foreign collaborations. Capital Goods sector contributes to 12% of India’s manufacturing output and 1.8% to GDP. Market valuation of the capital goods industry was $ 43.2 billion in FY22. Indian Electrical equipment is the largest sub-sector followed by Plant equipment & Earth moving/ mining machinery. The electrical equipment market share in India is expected to increase by $ 33.74 billion from 2021 to 2025, and the market's growth momentum will accelerate at a CAGR of 9%. Investment in engineering R&D sector is expected to reach $ 63 billion by 2025. The Index of Industrial Production (IIP), in absolute terms, increased to 146.5 in January 2023 from 145.3 in December 2022.

Covering more than 80,000 commercial products, India’s chemical industry is extremely diversified and can be broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilisers. India is the 6th largest producer of chemicals in the world and 3rd in Asia, contributing 7% to India’s GDP. India's chemical sector, which is currently estimated to be worth $ 220 billion in 2022 and is anticipated to grow to $ 300 billion by 2025 and $ 1 trillion by 2040. India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at global level (excluding pharmaceuticals). From April 2023 to June 2023 (provisional), India's dye exports (Dyes and Dye Intermediates) totalled $ 561.56 million. The domestic chemicals sector's small and medium enterprises are expected to showcase 18-23% revenue growth in FY22, owing to an improvement in domestic demand and higher realisation due to high prices of chemicals.

The Indian electronics manufacturing industry is projected to reach $ 520 billion by 2025. The demand for electronic products is expected to rise to $ 400 billion by 2025 from $ 33 billion in FY20. Electronics market has witnessed a growth in demand with market size increasing from $ 145 billion in FY16 to $ 215 billion in FY19—the market witnessed a growth of 14% CAGR from 2016- 19. Electronics system market is expected to witness 2.3x demand of its current size (FY19) to reach $ 160 billion by FY25. In FY23, the imports of electronics goods stood at $ 73.46 billion, whereas exports stood at $ 22.68 billion. During April-June 2023, the imports of electronics goods stood at $ 18.76 billion and exports stood at $ 6.75 billion. India is one of the largest consumer electronics markets in Asia Pacific Region and is home to considerable talent for electronic chip design and embedded software. India has committed to reach $ 300 billion worth of electronics manufacturing and exports of $ 120 billion by 2025-26. Major Government initiatives such as ‘Digital India’, ‘Make in India’ and supportive policies including favourable FDI Policy for electronics manufacturing have simplified the process of setting up manufacturing units in India. India is the second fastest digitizing economy amongst the 17 leading economies of the world. 

Pros and strengths

Well diversified customer base spread across various industries and geography: For the nine months period ended December 2023 and Fiscal 2023, the company has served over 1200 and 1100 customers respectively. It has sold its products in India and several other countries across the globe which include China, Malaysia, African countries such as Nigeria, Rwanda, Mozambique Kenya Ghana, Uganda, Zambia and Middle East countries such as Saudi Arabia and Kingdom of Bahrain. For the nine months period ended December 2023, its revenue from operations were Rs 50.91 crore of which approximately 94.43% of the revenue were from domestic markets and 5.57% from international markets. In India, during the same period, it has sold its products to around 24 states and 3 union territories including Gujarat, Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal, Assam, Haryana, Maharashtra, Telangana, Andhra Pradesh, Jharkhand, Delhi, Uttarakhand, Orissa, Madhya Pradesh, Himachal Pradesh, Karnataka, Chhattisgarh, Punjab, Bihar, Kerala, Jammu & Kashmir, Manipur, Dadar and Nagar Haveli, Puducherry, Goa, Arunachal Pradesh, Mizoram, Daman and Diu. Its revenue from exports for F.Y. 2022-23, 2021-22 and 2020- 21 were 3.29%, 7.32% and 4.95% of its revenue from operations respectively.

Long standing relationship with customers: With an experience of over a decade in this field, the company has been able to develop long-standing relationships with its customers some of whom have been with it for around five years. For instance, companies such as Astral pipes, Prince pipes, Ashirvad Pipes, Makson Pharmaceuticals, Sentini Flopipes and Best Ink and Solutions have been its customers for the last five fiscals. Maintaining strong relationships with its key customers is essential to its business strategy and to the growth of its business. Owing to its strong customer relationships and service, it has been able to retain a number of its customers for a long period of time ensuring uninterrupted supplies of its products to them.

Varied product range appealing to a diverse customer base: The company’s product portfolio includes (i) printers such as continuous inkjet printers (CIJ), Thermal Transfer Over printers (TTO), Drop on demand printers (DOD), NIJ printers (i.e. piezoelectric printers) and laser printers (ii) printer inks and (iii) printer consumable items i.e. makeup and cleaning solvents. Its range of products allows its customers to print vital variable information like batch number, date, price, logo, brand, size, barcodes, promotional codes, meter marks, special marks etc.

Risks and concerns

Depend on third-party logistics service providers: The company does not maintain an in-house transportation facility and depend on third-party transportation and logistics services at every stage of its business activities, including procurement from suppliers and delivering finished products to customers. While it engages transportation companies as needed, it has not established definitive agreements with any third-party transport service providers. The transportation solutions available in the markets where it operates are typically fragmented, and the cost incurred for goods transported by third-party carriers often exceeds the contracted transportation fees. Consequently, recovering compensation for damaged, delayed, or lost goods can be challenging. Recent instances, such as transportation vehicles being on strike due to fuel price increases, resulted in delays and potential disruptions in handling and procurement processes, which could have led to possible damage to products in transit. Although no such instances have been noticed as on date but such instances if occur may affect its business operations.

Require certain approvals, licenses, registrations and permits to operate business: The company requires certain statutory and regulatory permits, licenses and approvals to operate its business. Except as described below and as mentioned in the chapter titled “Government and Other Approvals”, it has obtained requisite permits and licenses which are adequate to run its business, however it cannot assure that there is no other statutory/regulatory requirement which it is required to comply with. Further, some of these approvals are granted for fixed periods of time and need renewal from time to time. The company is required to renew such permits, licenses and approvals. There can be no assurance that the relevant authorities will issue any of such permits or approvals in time or at all. Failure by it to renew, maintain or obtain the required permits or approvals in time may result in the interruption of its operations and may have a material adverse effect on its business, financial condition and results of operations.’

High working capital requirements: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards trade receivables, other current assets and inventories. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations. Further, it has high outstanding amount due from its debtors which may result in a high risk in case of non-payment by these debtors. In case of any such defaults from its debtors, may affect its business operations and financials.

Outlook

Aztec Fluids & Machinery is a leading manufacturers, exporter and suppliers of a quality assured assortment of Printers, Printer consumables and Printer Spares. Its product range includes Continuous Inkjet (CIJ), Thermal Transfer Overprint (TTO), Drop on Demand (DOD) and Laser printers. These products are highly acclaimed by its clients, based in the markets of the Indian Subcontinent, East Asia, Middle East and South East Asia, for their distinguished features like supreme quality, excellent performance, long functional life and easy operations. It has a sound and commodious infrastructure at Ahmedabad, India. It is managed by a team of highly experienced professionals, which ensures systematic execution of all the processes. Moreover, it is segregated into three major departments-manufacturing, quality control and warehousing & packaging. The manufacturing facility is the backbone of its infrastructure and outfitted with all the requisite equipment and technologies that ensure minimum wastage of the resources and also reduce the fabrication time. In addition, inspection of these departments is timely done, in order to ensure smooth execution of all the operations. On the concern side, the company compete with a number of other players which are engaged in the printers, inks and consumable items industry. Some of its significant competitors in this segment includes Control Print, Videojet Technologies, Domino and Markem Imaje. A number of its competitors are larger than it is, and some competitors have greater financial and other resources than it does and other economic advantages as compared to its business.

The company is coming out with an IPO of 36,00,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 63-67 per equity share. The aggregate size of the offer is around Rs 22.68 crore to Rs 24.12 crore based on lower and upper price band respectively. On performance front, total income for the financial year 2022-23 stood at Rs 5,452.97 lakh as compared to Rs 4,642.56 lakh in financial year 2021-22 representing an increase of 17.46%. Restated Profit after Tax for the financial year 2022-23 was Rs 327.38 lakh as compared to restated profit after tax of Rs 311.25 lakh during the financial year 2021-22. Meanwhile, the company intends to deepen penetration and strengthen its position in its existing key market areas such as Maharashtra, Uttar Pradesh, West Bengal, Assam and Haryana. Further, it seeks to tap other markets and increase its geographical presence by leveraging its experience in key market areas, enhancing its brand awareness and strengthening its sales and marketing network. Going forward, it intends to continue to strengthen and expand its existing relationships with its current customers and to acquire more valued customers.