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Riding the Aerospace Upcycle with Strategic Diversification

Aequs Ltd. (AL), founded in 2000, is a precision engineering firm operating from a single SEZ with fully integrated manufacturing capabilities, primarily serving the aerospace sector (~90% of FY25 revenue). The company has expanded into consumer electronics (portable computers, smart devices), plastics (toys, figurines), and consumer durables (cookware, small appliances). Its aerospace clientele includes Boeing, Airbus,Bombardier etc. while consumer brands served include Hasbro, Spin Master, and Tramontina. AL runs three manufacturing clusters in India and maintains two facilities in France and the U.S.

* The Indian precision engineering components (PEC) market, valued at Rs.2,992.92 billion in 2024, is projected to reach Rs.4,946.96 billion by 2030 at an 8.74% CAGR, driven by government-led manufacturing initiatives, global value chain integration (China+1), cost competitiveness, skilled labour, and rising demand across automotive, aerospace, and electronics sectors.

* Revenue increased from Rs.812cr in FY23 to Rs.925cr in FY25, reflecting a CAGR of 6.7%. However, net losses persisted at Rs.109cr, Rs.12cr, and Rs.102cr in FY23, FY24, and FY25 respectively, primarily due to weakness in the Consumer Segment.

* The company sees significant potential in the consumer segment going forward and has invested in capacity building and expects it to reward in upcoming years.

* The planned debt repayment of Rs.433.2cr from the IPO proceeds will result in substantial saving on interest cost (D/E will reduce from 1.1x to 0.2x) which should also result in the company turning profitable at the PAT level.

* The company’s long-standing partnerships—15 years with Airbus and 9 years each with Safran and Boeing along with a portfolio of over 5,000 SKUs, underscore its proven capabilities, credibility within a high–entry-barrier customer base, and strong long-term growth potential.

* On November 10, 2025, the Company completed a pre-IPO equity placement of Rs.144cr at Rs.123.97 per share, issuing shares to SBI Emergent India Fund, DSP India Fund – India Long/Short Strategy Fund (Cash Management Option), SBI Optimal Equity Fund – Long Term, and Think India Opportunities Master Fund LP.

* In FY25, consolidated capacity utilization stood at 43% (Aerospace 65-70%, Consumer ~20%) and the company sees significant potential in the consumer segment going forward and is also positioned to benefit from the massive, multi-year demand upcycle in global commercial aerospace, driven by order backlogs and fleet renewal.

* At the upper price band of Rs.124, AL is valued at 9x FY25 Mcap/Sales, which is reasonable compared to peers. Strong relationships with marquee customers, a strategy to move up the value chain into complex components, and IPO-led debt reduction position the company for margin expansion and growth. Though currently lossmaking, long-term prospects are supported by aerospace tailwinds and diversification into consumer durables. We recommend a ‘Subscribe’ rating for high-risk investors with a long-term horizon.

Purpose of IPO

The offer consists of a fresh issue of Rs.670cr and an Offer for Sale (OFS) amounting to Rs.251.8cr. The purpose of the issue is to i) Repayment/prepayment of certain borrowings and related penalties (433.17cr). ii) Investment into three wholly-owned subsidiaries (64cr) and iii) Funding acquisitions.

Key Risks

* Regional Risk: All manufacturing units are concentrated in Karnataka, creating exposure to location-specific disruptions.

* Revenue Dependence: Aerospace contributes 89.2% of FY25 revenue, indicating high reliance on a single segment.

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