Aditya Infotech IPO review (Apply)

•    The company is engaged in the manufacturing and marketing of comprehensive range of security and surveillance products.
•    It enjoys virtual monopoly as a leader in the segment.
•    It posted growth in its top and bottom lines for the reported periods.
•    Based on its recent financial data, the issue prima facie appears aggressively priced.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Aditya Infotech Ltd. (AIL) offers a comprehensive range of advanced video security and surveillance products, technologies and solutions for enterprise and consumer segments under its ‘CP PLUS’ brand which has strong recall value. In addition, it offers solutions and services such as fully integrated security systems and Security-as-a-Service directly and through its distribution network who address the requirements of end-customers engaged in a broad range of sectors such as banking, insurance, real estate, healthcare, industrial, defence, education, hospitality, manufacturing, retail and law enforcement.

AIL’s business is primarily classified as: (i) manufacturing and trading activities; and (ii) trading activities. Its manufacturing and trading activities include the manufacture and sale of CP PLUS products and the provision of after-sales services in relation to the CP PLUS products sold, while its trading activities are limited to distribution of products of Dahua. In 2017, AIL entered into a joint venture agreement with Dixon Technologies (India) Limited (“Dixon”), an electronic manufacturing services company in India, to expand its manufacturing operations by creating a captive manufacturing plant and leveraging Dixon’s expertise in manufacturing processes. On September 18, 2024, AIL acquired Dixon’s stake in the joint venture.

AIL’s product portfolio, including products that it source from third parties, deploy wide variety of security technologies such as artificial intelligence (“AI”) and machine learning (“ML”) to deliver Edge-based AI analytics, all developed inhouse by its dedicated research and development (“R&D”) team, integrated Internet of Things (“IoT”) ecosystem for connected and smart homes as well as a number of cloud services, including health monitoring systems (“HMS”) and attendance management systems (“AMS”). Its product line comprises high definition (“HD”)-analog cameras, digital video recorders (“DVRs”), internet protocol (“IP”) network cameras, network video recorders (“NVRs”), biometric products, access control products, mobile surveillance solutions, body-worn cameras, thermal cameras, temperature screening solutions, interactive displays, routers, cables, power supplies (“SMPS”), racks and other accessories and products. 

The company also partners with other companies and government agencies to develop indigenized innovations including Indian-made Systems on Chips (“SoCs”) and thermal cameras. In Fiscal 2025, it offered 2,986 stock keeping units (“SKUs”). In Fiscal 2025, it sold products in over 550 cities and towns in India. Its operations are backed by r network of 41 branch offices and 13 return merchandise authorization (“RMA”) centres across India, as of March 31, 2025. As of the said date, it had 1274 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 19259259 equity shares issue worth Rs. 1300.00 cr. (at the upper cap). The issue consists of 7407407 fresh equity shares (worth Rs. 500.00 cr. at the upper cap), and an OFS (Offer for Sale) of 11851852 equity shares (worth Rs. 800.00 cr. at the upper cap). The company has announced a price band of Rs. 640 – Rs. 675 per equity shares of Re. 1 each. The issue opens for subscription on July 29, 2025, and will close on July 31, 2025. The minimum application to be made is for 22 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 16.43% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 375.00 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes.

The company has reserved equity shares worth Rs. 6.00 cr. (approx. 88889 equity shares at the upper cap) for its eligible employees and offering them a discount of Rs. 60 per share, from the rest, it has allocated not less than 75% for QIBs, not more than 15% for HNIs, and not more than 10% for Retail investors.

The joint Book Running Lead Managers (BRLMs) to this issue are ICICI Securities Ltd., and IIFL Capital Services Ltd., while MUFG Intime India Pvt. Ltd. is the registrar to the issue. 

After issuing initial equity shares at par, the company issued further equity shares in the price range of Rs. 144.30 – Rs. 340.32 per share (on the basis of Re. 1 FV) between March 2023, and September 2024. It has also issued bonus shares in the ratio of 4 for 1 in July 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 0.10, and Rs. 0.20 per share. 

Post-IPO, its current paid-up equity capital of Rs. 10.98 cr. will stand enhanced to Rs. 11.72 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 7911.89 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has on a consolidated basis) posted a total income/net profit, of Rs. 2295.56 cr. / Rs. 108.31 cr. (FY23), Rs. 2795.96 cr. / Rs. 115.17 cr. (FY24), Rs. 3122.93 cr. / Rs. 351.37 cr. (FY25). Quantum jump in net profit for FY25 is attributed to exceptional items worth Rs. 248.63 cr. 

For the last three fiscals, the company has posted an average EPS of Rs. 22.02 and an average RoNW of 32.11%. The issue is priced at a P/BV of 7.06 based on its NAV of Rs. 95.64 as of March 31, 2025, and at a P/BV of 5.21 based on its post-IPO NAV of Rs. 129.47 per share (at the upper cap). 

If we attribute FY25 annualized earnings (before exceptional items) to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 76.97. Based on FY24 earnings, the P/E stands at 56.34. Based on post exceptional items net profit figure, FY25 P/E stands at 22.52. Thus, the issue prima facie appears aggressively priced. Perhaps the company is asking premium for its virtual monopoly and likely fancy as first mover post listing in the segment.

The company has posted PAT (before exceptional items) margins of 4.97 % (FY23), 5.02% (FY24), 3.29% (FY25), its RoCE margins of 23.07%, 23.57%, 33.27%, respectively for the referred periods.

DIVIDEND POLICY:
The company has paid dividends of 162.80% (FY23), 176% (FY24), and 164% (FY25). It has adopted a dividend policy in September 2024, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with. 

MERCHANT BANKER’S TRACK RECORD:
The two BRLMs associated with the offer has handled 79 pubic issues in the past three fiscals, out of which 18 issues closed below the offer price on listing date.