Amber Enterprises IPO Review

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Amber Enterprises IPO

7

Company Background

7.0/10

Price Band

5.5/10

Company Financials

7.5/10

Industry Situation

8.0/10

Reliability

7.0/10

Pros

  • Strong brand
  • Good growth potential of the RAC segments in India
  • Strong customer relations
  • It has its own R & D unit

Cons

  • Low net margin (less than 2%)
  • High PE ratio of 40

Amber Enterprises IPO Performance Overview

IPO Name Amber Enterprises IPO Amber Enterprises
Opening Date 17th January 2018 17th January 2018
Shares Issue Size 49,27,351 49,27,351
Face Value ₹10
IPO Price Band ₹855 - ₹859
Bid Lot 17 Shares
Total Bid Amount ₹14,535 - ₹14,603
Listing At NSE, BSE
Retail Allocation 35%
Estimated IPO Size ₹1200 Crore
Day# No. of Shares Subscribed Shares Subscription %age
Day 1 49,19,953 99%
Day 2 TBA TBA
Day 3 TBA TBA

 

Amber Enterprises India Limited Day 1 Performance

The IPO saw an amazing start on day 1 with the IPO clocking almost 100% of the subscription within the first bidding day itself.

That definitely gives an idea about the market perception. You still have a couple of days to apply for the IPO.

Amber Enterprises India Ltd. Background

Amber is a Punjab based component manufacturer with expertise in manufacturing room air conditioning parts. It was incorporated in the year 1990. Since there is an increasing number of prospects for air conditioning and refrigeration, the company enjoys a lot of sales and market visibility.

India shows a relatively dim susceptibility of AC equipment, but statistics show that air conditioning needs are going to increase in the coming years. Hence, this is an industry that has a lot of future potential. Indian manufacturing plants aid in lowering the entire shipping and manufacturing costs to a bare minimum.

Many international companies already have manufacturing plants in India, enabling them to push through sales. Amber Enterprises also shows positive signs in terms of future growth. Another big advantage of Amber Enterprises India Ltd. is that they have 11 manufacturing plants built around their core customer ground for increased efficiency and service management.

All this combined effort garnered them a total of 55% market share in the fiscal year of 2017 while the market share in RAC is 19.1. They also decorate advisory roles in helping out organizations in meeting their refrigeration needs. They have a comprehensive portfolio of customers including LG, Panasonic, Hitachi, Daikin, Whirlpool, Blue star and Voltas.

Amber Enterprises India Ltd. also shells out a part of its earnings to R&D which enables them to make energy efficient and eco-friendly products.

Also Read: 50+ Upcoming IPOs in India

The manufacturing portfolio of Amber Enterprises India Ltd. consists of the following divisions:

  • RAC or room air conditioners: RAC includes the indoor and outdoor cooling systems that are prominently used in homes, offices, and auditoriums.
  • RAC Components: Amber Enterprises India Ltd. RAC components include individual machine parts that are critical to the working of an air conditioning unit.
  • Miscellaneous: These are the components which do not fall under the above two categories that Amber Enterprises India Ltd. manufactures. This list includes plastic and metal components or shells for microwaves or washing machines.

Their biggest strength can be attributed to the customer care that they offer. Every new customer of Amber Enterprises India Ltd. converts into a loyal, all-time customer due to the way in which the company handles and cooperates with them.

The IPO that the company has setup is primarily for paying off the debts and acquiring new funds for corpus fund needs. This is a really good opportunity for the investors because they will be acquiring shares of the market leader when it comes to RAC OEM/ODM manufacturing.

To elaborate on the objective behind Amber Enterprises India Ltd., let’s look at what the company aims to achieve with the IPO that they have scheduled.

  • Offer for sale: Now, the company shareholders are entitled to sell their portion of shares, though the company will not be eligible to receive any part of the proceeds for sale.
  • New funds: The company will gain new funds from the investors which will be utilized for:
    • Repayment or payment of any debt or borrowing of the company
    • General expenditure

The accolades include the “Best of Best Performance Award” from the international brand LG in the successive years of 2016 and 2017.

Important IPO details of Amber Enterprises India Ltd.

Here are some quick details on IPO events and timings:

Event Date
IPO Open Date 17th January, 2018
IPO Close Date 19th January, 2018
Finalization of Basis of Allotment 24th January, 2018
Initiation of Refund 25th January, 2018
Credit of Shares to Demat Accounts 29th January, 2018
Listing on Exchange 30th January, 2018

 

Amber Enterprises India Ltd. is now starting a maiden IPO to finance its prepayment or debt repayment plans in addition to its general corpus fund needs.

This IPO will consist of roughly 69,84,865 shares of ₹10 per equity share. This will be done via book building route and will have a price band of ₹855 – ₹859 according to the upper and lower price bands. This will be done to mobilize close to INR 60 Cr.

The issue opens for subscription in two days’ time, i.e. on 17th January 2018. It offers the eligible employees a discount of ₹85 per each share and has reserved 50,000 shares for them. The minimum application must be made for 17 shares and after that, the lots are available in multiples of 17. The shares shall be listed on BSE/NSE post allotment. The Bayesian Logistic Regression Model or BLRMs to this issue are the following:

The registrar to the issue is Karvy Computershare Pvt. Ltd.  Amber Enterprises India Ltd. has a turnover of ₹979.70 Cr./₹22.20 (FY14), and the current one is at ₹1652.26 Cr./₹27.90 Cr. The company faced a setback for FY16 because of realigning the business strategies with non-profitable and non-core businesses.

For the current fiscal year, the company has made ₹27.31 Cr. and a turnover worth ₹941.55 Cr. The most significant advantage of the company now is that RAC is no longer a seasonal business.

Here are all the details on its financial performance in the last 5 years or so:

 

On March 17th, 2017, the company generated revenue of ₹1652.2 Cr. Another advantage of Amber Enterprises India Ltd. is the consistently profitable financial record. The scale of economies is very wide so that the company can produce goods and create profit without any dead stock.

The management plays a massive part in the success of the company as they are well-experienced in the field of RAC.

Amber Enterprises India Ltd Goals

With the current IPO, the company plans to expand their reach far beyond what it is now. One of the primary objectives is to expand the current portfolio of ODM equipment. The second objective is to expand the domestic customer base while increasing the export sales.

Also, the company plans to strengthen their R&D department to continue on their path of innovation. The company also plans to agree with possible collaborations and profitable acquisitions.

The primary emphasis is always on increasing profitability while maintaining high efficiency.

Reasons to invest in Amber Enterprises India Ltd.

There are several reasons to invest in this company:

  • The company’s revenue has seen a growth of 37% CAGR in the past five years.
  • A prominent player in RAC manufacturing
  • It is the only RAC manufacturing company with the most market shares.

Reasons not to invest in Amber Enterprises India Ltd.

  • The company had low margins of 1-3% for the last five years. Hence, the profitability will be not so high.
  • The company’s sales are concentrated on a specific customer base which limits the company’s growth beyond a certain point.
  • The company will stand a loss if the customers stop outsourcing manufacturing.

Recommendation on Amber Enterprises India IPO

Amber Enterprises India Ltd. with the current IPO asks for a higher price band at ₹859 with a PE ratio constituting 62X – 71X. However, the company is a major player in the RAC. Hence, it does capture the attention of the investors. Also, you can wait to see if the IPO would get a discounted price before listing.

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