Aether Industries Ltd - IPO Note


Aether Industries Ltd - IPO Note


Price range
Rs. 610 to 642
Issue Period:
May 24, 2022
May 26, 2022
May 24, 2022

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 808 cr.
Public Issue
1.3 cr. shares
Market cap post IPO
7,992 cr.
Equity Pre - IPO
11.4 cr.
Equity Post - IPO
12.4 cr.
Issue type
Fresh Issue & OFS

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Strengths and strategies

Differentiated product portfolio:
Aether's products are used in a variety of industries, including pharmaceuticals, agrochemicals, material science, coatings, high performance photography, additives, and oil and gas. They are primarily focused on the production of advanced intermediates and specialty chemicals, which require complex and differentiated chemistry and technology as core competencies.

Aether has achieved these market positions by developing differentiated processes with the use of their core competencies of chemistry and technology, which helped them to optimize the use of conventional raw materials, improve atom economy, enhance yields, reduce effluent discharge, and increase cost competitiveness. Based on the technical expertise they have developed over the years; they are able to carry out these processes for their products at global scale capacities.

In CY2020, they were the sole manufacturer in India of 4MEP, MMBC, T2E, OTBN, NODG, DVL and Bifenthrin Alcohol, and they were the largest manufacturers in the world by volume for 4MEP, T2E, NODG and HEEP. They have emerged as one the biggest competition and threats to the Chinese specialty chemical companies for these products and the Chinese customers are dependent on Aether for supplying these products

Long standing relationships with diversified customer base:
Company’s Top-10 customers contributed approximately 55.76% and 56.23%, respectively; and their Top-20 customers contributed 72.93% and 73.50%, respectively. They enjoy relationships in excess of 5 years with 7 out of Top-10 customers.

Their customer engagements are dependent on the company delivering quality products consistently. Due to the resources involved in engaging with new suppliers, customers are less inclined to pursue alternate supply sources. This provides company with an advantage over new entrants that would need to make significant investments and endure a long gestation period with potential customers in order to effectively compete. 

Company’s customers include over 160 multinational, global, regional and local companies. As of March 31, 2022, their product portfolio was sold to over 34 global customers in 18 countries and to over 154 domestic customers.

Indian Global

Pharmaceutical Companies

  • Aarti Drugs Ltd,
  • Alembic Pharmaceuticals Ltd,
  • Atul Bioscience Ltd,
  • Cadila Healthcare Ltd,
  • CTX Lifesciences Pvt Ltd,
  • Divis Laboratories Ltd,
  • Dr. Reddy’s Laboratories Ltd,
  • Granules India Ltd,
  • Hetero Drugs Ltd,
  • IOL Chemicals,
  • Ind-Swift Laboratories Ltd,
  • IPCA Laboratories Ltd,
  • Laurus Labs Ltd,
  • Lupin Ltd,
  • Mankind Pharma,
  • Neogen Chemicals Ltd,
  • MSN Laboratories Pvt Ltd.

Generic Pharmaceutical Companies

  • Moehs Iberica SL (Spain),
  • Microsin SRL (Romania) and
  • Dr. Reddy’s Laboratories (India and Mexico)
  • Global and domestic generic agrochemical companies
  • Adama Agan (Israel),
  • Adama Makhteshim (Israel),
  • Deccan Fine Chemicals (India) and
  • UPL Limited (India).
  • Global oil and gas companies
  • Aramco Performance Materials LLC (US/Saudi Arabia).
  • Global material science / coatings / specialty polymer companies
  • Altana AG (Germany),
  • BYK Chemie GmbH (Germany)
  • Avient Corporation (UK)
  • Global textile companies
  • Milliken & Co. (USA).
  • Global high performance photography companies
  • Polaroid Film BV (Netherlands).
  • Global marketing and trading companies
  • Austin Chemical Company, Inc. (USA) and
  • Connect Chemicals GmbH (Germany).
  • Global and domestic chemical companies
  • Ningbo Noubai Pharmaceutical Co. Ltd (China),
  • Saurav Chemicals Limited (India),
  • Neogen Chemicals Limited (India),
  • IOL Chemicals and Pharmaceuticals Limited (India).
  • Global organometallic and halogenated chemistries company
  • Tosoh FineChem Corporation (USA)

Business model that combines large-scale manufacturing, CRAMS, and contract manufacturing:
Aether is among the few Indian speciality chemical companies to have successfully launched 3 separate business models – its own products, contract manufacturing and CRAMS – in just 5 years of its incorporation. It helped Aether in cross-selling its products and services across its verticals, which benefitted the company in achieving large scale production and negotiating better prices with its suppliers & clients.

Aether’s intermediate and speciality chemical customers are also targeted customers for CRAMS and contract manufacturing businesses, while CRAMS business allows Aether to work with innovative global companies on cutting-edge new products which enhances the company’s own R&D skill sets to develop new products for intermediate and speciality chemical segment.

Expanding the Product Portfolio and diversifying into additional business segments:
 Aether plans to continue to expand their product portfolio both in line with their existing new competencies but also by adding new competencies. In the next 3 years, they expect to invest approximately INR 12.5 crore towards R&D in the 1 st year with an increasing trend of 30% to 35% in the next 2 years.

Some of the key APIs for which they expect to launch advanced intermediate products in the next year during Fiscal 2022 and Fiscal 2023.

  • Dolutegravir (Antiretroviral to treat HIV/AIDS)
  • Carbamazepine (Anti-epileptic)
  • Oxcarbazepine (Anticonvulsant)
  • Memantine (treats symptoms of Alzheimer’s)
  • Ambroxol (treatment of respiratory disease)

In addition, they intend to continue to add new core chemistry and technology competencies, which will lead to additional product line developments. They are considering producing pharmaceutical active ingredients (APIs), which represents a forward integration for them from their current product spectrum of advanced intermediates.

In such APIs, they would produce the key advanced intermediates themselves and, thus, they will be backward integrated all the way to commodity chemicals. Another segment they are actively considering is the advanced organic silicone products market, which lends itself into high-end high-value applications in material sciences, coatings, advanced electronics and other similar applications.

Expanding Manufacturing, R&D and Pilot Plant Capacities:
To meet the growing demand from existing customers and meet the needs of new customers, they intend to and are currently expanding their manufacturing capacities for existing products such as 4MEP and BFA. They also intend to expand manufacturing capacity for their new product line, which they are developing and commercializing.

To achieve these expanded capacities, in August 2021, they commenced construction of a new manufacturing facility at a 3rd site near their existing manufacturing facilities in Sachin. They are also in discussions with relevant authorities for acquiring land located in Sachin for a 4th facility, where they intend to manufacture other intermediates for applications in pharmaceuticals, agrochemicals, coatings and oil & gas sectors.

In addition, they look to build strategic alliances with innovator companies across end-user industries. They are also expanding the capacity of their R&D laboratories by adding an additional 30 fume hoods. This expansion is already underway and is scheduled to be finished by December 2021. In addition, they are expanding their Pilot Plant by installing additional trains of pilot scale equipment which will triple their current capacity.


Peer comparison

Particulars (Rs. in Crores) FY21 Revenue CAGR (FY19 - FY21) PAT CAGR(FY19-21) RoE (%) RoCE (%) EPS PE (x)
Aether Ltd 50.00% 75.00% 40.80% 20.00% 7.45 86.17
Clean Science and Technology Ltd 29.00% 60.00% 36.74% 60.50% 18.68 82.00
Navin Fluorine International Ltd 13.00% 21.00% 15.76% 19.20% 52.03 69.00
Vinati Organics Ltd 13.00% 7.00% 17.45% 26.50% 26.20 60.00
PI Industries Ltd 23.00% 28.00% 13.82% 17.30% 49.92 47.30
Fine Organic Industries Ltd 10.00% 8.00% 16.45% 21.50% 39.25 79.60


  • The company’s business depends on the demand from the global pharmaceutical and FMCG industry for a significant portion of its revenue. Any downturn in the global pharmaceutical or FMCG industry could adversely affect business performance.
  • The company deals in hazardous chemicals, and changes in safety, health and environmental laws or regulations may adversely affect its business and operations.
  • The company earns 55-60% of its revenues from export and deals in various global currencies, which is very volatile in nature.
  • Top 20 customers contributed to 72.93% of total revenue from operations in 9MFY22.

Company Description

Aether Industries Limited (“Aether”) is a specialty chemical manufacturer in India focused on producing advanced intermediates and specialty chemicals involving complex and differentiated chemistry and technology core competencies. Company’s business was started in 2013 with a vision to create a niche in the global chemical industry with a creative approach towards chemistry, technology and systems that would lead to sustainable growth. In the 1st phase of their development through Fiscal 2017, they focused on building their team and infrastructure and on their R&D centered around building their core competencies. Company’s revenue generation operations commenced with their 2nd phase in Fiscal 2017.

The company operates under 3 business models:
Own intermediates and speciality chemicals (FY21 revenue contribution of 73%), CRAMS (FY21 revenue contribution of 8%), and Contract/exclusive manufacturing (FY21 revenue contribution of 19%)

Aether has 8 chemistry competencies to use for their wide array of products, which enables them to cater to niche and advanced intermediate requirements of a wider range of end-products and applications. All these competencies have been developed inhouse, which is one of the core strengths of their R&D team.

The details of 8 Products, their applications, their market position globally and in India:

Product Industry Application Company Global Market Position* Global market size (MT)* Quantity Manufac- tured by the Company (MT)* Company India Market Position* Launch Year Volume Produced in Fiscal 2021 (MT) Volume CAGR (Fiscal 2019 to Fiscal 2021) Revenue Fiscal 2021 (₹ Cr)
4-(2-Methoxyethyl) Phenol (4MEP) Metoprolol Succinate / Metoprolol Tatrate Largest manufacturer in the world (with 28% market share in CY2020) 1,750 488 Only manufacturer in India Dec’ 2016 611.89 44.15% 94.44
3-Methoxy-2- Methyl-benzoyl Chloride (MMBC)^ Methoxyfenozi de Second largest manufacturer in the world (with 14% market share in CY2020) 1,750 238 Only manufacturer in India Sep’ 2019 237.60 NA 69.48
Thiophene-2- Ethanol (T2E) Clopidogrel, Ticlopidine APIs Largest manufacturer in the world (with nearly 50% market share in CY2020) 780 392 Only manufacturer in India May 2017 42.03 20.18% 68.22
Ortho Tolyl Benzo Nitrile / 4’- Methyl- 2-Cyanobi-phynyl (OTBN) Valsartan, Telmisartan, Olmesartan, Losartan, Candisartan APIs Market share of 8% in CY2020 5,045 417 Only manufacturer in India Dec’ 2018 404.56 291.52% 62.08
N-Octyl-D- Glucamine / 1- Deoxy-1- (Octylamino)-D- Glucitol (NODG) Naproxen, Dexketoprofen APIs Largest manufacturer in the world (with 46% market share in CY2020) 845 396 Only manufacturer in India July 2015 451.97 23.20% 28.99
1-2- (2Hydroxyethoxy) Ethyl Piperazine (HEEP) Quetiapine, Hydroxyzine APIs Largest manufacturer in the world (with 34% market share in CY2020) 500 171 One of 3major manufacturers, only manufacturer in India to be back- integrated into key raw material May 2018 156.08 53.08% 18.24
Delta-Valerolactone (DVL) Coating additive, speciality monomer, electronic chemical Second largest manufacturer in the world (with 13% market share in CY 2020) 650 84 Only manufacturer in India Sep’ 2016 112.41 46.17% 12.48
Bifenthrin Alcohol Bifenthrin Negligible 3,250 144 Only manufacturer in India Aug’ 2021 NA NA NA


Aether is the sole manufacturer in India of critical chemicals, such as – 4MEP, MMBC, T2E, OTBN, NODG, DVL and Bifenthrin Alcohol, and the largest manufacturer in the world by volume for 4MEP, T2E, NODG and HEEP. In the past 4 years, Aether replaced the entire imports of these products from China and also started exporting them to 17 countries. Exports contributed 56% of FY21 revenue. Over FY19-21, Aether’s revenues/ EBITDA/ PAT grew at a CAGR of 49.5%/ 53.6%/ 74.5% respectively, while EBITDA and PAT margins improved by 132bps (to 24.9%) and 421bps (to 15.8%), respectively.

The Company have delivered good growth in Sales over past few years along with stable margin profile. At the upper end of the IPO price band the stock is offered at 64x its FY22E annualized earnings.

Although the issue is aggressively priced & leave little scope of upside in the near term, considering the growth opportunities for speciality chemicals in pharma, agrochemicals & FMCG space, and improving prospects for contractual manufacturing & CRAMS under Make-in-India initiatives, we recommend a “Subscribe” rating to this IPO with long term horizon in mind.

Key Information

  • Use of Proceeds:
    • Aether’s proposed issue size is INR 808 cr (INR 627 cr of fresh issue & INR 181 cr of OFS).
    • The company will utilize INR 165 cr for working capital and INR 138 cr for full debt repayment, while INR 163 cr will be deployed for capacity expansion from 6,096 MTPA to 6,500 MTPA.
    • The new capacities will be ready by Oct 2022.
    • The remaining amount of INR 161 cr will be utilized for general corporate purposes.
  • Book running lead managers:
    • HDFC Bank, Kotak Mahindra Capital
  • Management:
    • Ashwin Jayantilal Desai- Promoter & MD, Dr Aman Ashvin Desai- Promoter & WTD, Mr Faiz Arif Nagariya- CFO

Financial Statement

Profit & Loss Statement:- (Consolidated)

Particulars (Rs. in Crores) FY19 FY20 FY21 H1FY22
Revenue from Operations 201.18 301.81 449.82 442.54
COGS 109.58 156.16 230.69 214.88
Gross Profit 91.61 145.65 219.13 227.66
Gross Margin (%) 45.53% 48.26% 48.72% 51.44%
Employee Benefit Expenses 10.95 13.38 22.11 21.29
Other Expenses 33.15 60.52 84.86 80.39
EBITDA 47.51 71.76 112.16 125.99
EBITDA Margin (%) 23.61% 23.78% 24.93% 28.47%
Depreciation 6.41 7.85 11.01 11.42
EBIT 41.10 63.91 101.15 114.57
EBIT Margin (%) 20.43% 21.18% 22.49% 25.89%
Finance Cost 10.60 9.38 11.32 10.04
Oher Income 2.10 1.98 3.98 6.77
Profit Before Exceptional Items & Tax 32.60 56.51 93.81 111.31
Exceptional Items - - - -
Profit Before Tax 32.60 56.51 93.81 111.31
Tax 9.26 16.55 22.69 28.41
Effective Tax Rate (%) 28.41% 29.29% 24.18% 25.52%
Profit After Tax 23.34 39.96 71.12 82.90
PAT Margin (%) 11.60% 13.24% 15.81% 18.73%
Earnings Per Share (Rs.) 7.45 7.36 4.24 2.48