Amber Enterprises Jumps 37% Over IPO Price On Stock Market Debut

Amber Enterprises Ltd. listed at a premium of 37 percent at Rs 1,175 per share on the National Stock Exchange Ltd., compared to its issue price of Rs 859 apiece. The stock made its trading debut at Rs 1,180 on the BSE Ltd.

The air-conditioner manufacturer's Rs 600 initial public offer was popular among investors with shares being subscribed 165.31 times by the end of bidding.

The portion set aside for qualified institutional buyers was subscribed 175.82 times, non-institutional investors 521.71 times and retail investors 11.42 times. The issue attracted demand of nearly Rs 70,000 crore, merchant bankers sources said.

It raised Rs 179 crore from anchor investors. The IPO included a fresh issue of shares worth up to Rs 475 crore and Rs 125 crore by promoters Jasbir Singh and Daljit Singh.

Gurugram-based Amber Enterprises manufactures air conditioners. Besides, it makes refrigerator components, water purifiers and washing machines. The company plans to use the proceeds for repayment and advance payment of certain loans and other general corporate purposes.

Business

Amber Enterprises is the largest original equipment maker and designer for air-conditioners, with a market share of 55.4 percent as of March last year.

Among its clients are eight of the top 10 air-conditioner makers, including Daikin, Hitachi, LG, Panasonic, Voltas and Whirlpool, which together command around 75 percent of the market. Amber Enterprises got 93 percent of its revenue in the year ended March 2017 from its top 10 clients.

It designs and makes window and split ACs ranging from 0.75 tonnes to 2 tonnes and inverter ACs from 1 to 2 tonne. The company has 11 manufacturing facilities across seven locations in India. Capacity utilisation levels are sub-50 percent, indicating not much capex in the immediate future.

Besides, it also makes parts for household appliances and automobiles. But it is highly dependent on the AC industry for its revenue.

Financial Highlights

Amber Enterprises’ net worth, as of Sept. 30 last year, was close to Rs 363 crore, translating into book value of Rs 115 a share after fresh issuance.

Its revenue has been growing at an annualised rate of 17 percent, while net profit rose at 9 percent in five years to March 2017.

For the first half ended September, revenue and net profit stood at Rs 938 crore and Rs 27 crore, respectively.

Earnings before interest, tax and depreciation and amortisation grew at a compounded annual growth rate of 23.5 percent, while Ebitda margins expanded 150 basis points in the last five years to 7.8 percent.

For the first half ended September, Ebitda and margins stood at Rs 84 crore and 9 percent, respectively.

The company has a total debt of close to Rs 554 crore, which would fall it looks to use Rs 400 crore from the IPO proceeds to pare debt.

Peer Comparison

Amber Enterprises has no listed competitors. Dixon Technologies Ltd. has a similar business model but caters to a different market—an equipment vendor for makers of washing machines, LED televisions, lighting products and mobile phones.

The company has a longer working capital cycle than Dixon, which impacts its return ratios.

Dixon’s had return ratios than Amber Enterprises in the year ended March 2017.

Shareholding Pattern

On listing, promoter holding will fall to 44 percent from 59 percent.