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Avalon Technologies IPO Open, Gets Only 3% Subscription on Day 1

The IPO of Avalon Technologies opened for subscription on April 3 with a price band of Rs 415-435 per share.

The initial public offering (IPO) of Avalon Technologies, an integrated electronic manufacturing (EMS) services provider, opened for subscription on April 3 and will continue until April 6, 2023, with a price band of Rs 415-435 per share. The stock is expected to be listed on April 18, 2023, and will likely debut with peers such as Dixon Technologies, Amber Enterprises, Syrma SGS Technology, and Kaynes Technology.

The company is a fully-integrated EMS company with ten manufacturing units in India and two in the US – Georgia and California. Avalon Technologies’ products, from designing and assembling printed circuit boards (PCBs) to manufacturing complete electronic systems (box build), are widely used in industries such as clean energy and emerging communication technology.

The public issue is a combination of fresh and offer-for-sale (OFS) portions, with the new issue size being Rs 320 crore and the OFS comprising Rs 545 crore. The issue is divided into four parts – 75 per cent for qualified institutional buyers (QIBs), 10 per cent for big non-institutional investors (NIIs), 5 per cent for small NIIs, and the remaining 10 per cent for retail investors.

On the financial front, revenue from operations rose by 8 per cent to Rs 584 crore in eight months of FY23 from 8MFY22, while profit-after-tax (PAT) dropped 8.1 per cent to Rs 34 crore from Rs 42 crore in the same period.

Avalon Technologies intends to use the funds raised from the fresh issue for various purposes:
Repaying a part or all of the outstanding loans taken by the company and one of its major subsidiaries, Avalon Technology and Services Private Limited – Rs 145 crore
Financing the working capital requirements of the company – Rs 90 crore
Fulfilling general corporate purposes

The company intends to deleverage further, which should boost profitability and improve return ratios, benefitting from the government’s ‘Make in India’ and PLI schemes promoting local manufacturing of components and electronics systems. The risks and concerns include a general slowdown in global economic activity lately, unfavourable forex currency movements, delayed execution and expansion of the order book, difficulty maintaining profitability, and stiff competition.

Among the company’s key strengths are its well-diversified business, established relationships with a marquee customer base, and a global delivery footprint with high-quality standards. Additionally, the company has advanced manufacturing and assembly capabilities, strong financial performance, stable cash flows, a visible growth profile, and an experienced board, management, and operating team.

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