Bengaluru-headquartered Aequs Limited enters the capital markets with a Rs 922 crore public offering priced between Rs 118-124 per share, seeking to capitalize on robust aerospace sector dynamics while navigating profitability challenges. The precision components manufacturer, deriving approximately 89% of revenues from aerospace operations and maintaining a similar export contribution, presents a dichotomous financial narrative—impressive operational expansion coupled with persistent bottom-line losses. With manufacturing footprints spanning India, the United States, and France, the enterprise caters to marquee clients including Airbus, Boeing, Collins Aerospace, and Safran, yet grapples with elevated working capital requirements and customer concentration risks that temper investor enthusiasm despite promising industry tailwinds.

Corporate Profile and Operational Infrastructure

Established in 2000, Aequs Limited has evolved into a specialized manufacturer of high-precision components serving predominantly aerospace clients alongside consumer segment operations. The company's manufacturing prowess encompasses an aggregate 22 lakh square feet of production facilities, generating approximately 29.2 annual machining and moulding hours across its global operations. The aerospace division commands three dedicated facilities—one within a Karnataka Special Economic Zone and two international establishments in the United States and France—while consumer operations function through two additional Indian facilities within the same SEZ framework.

The enterprise's technical capabilities span machining, forging, surface treatment, and assembly processes, positioning it advantageously within the high-entry-barrier aerospace manufacturing ecosystem. Aequs maintains relationships with prominent multinational original equipment manufacturers, delivering over 5,000 distinct product variants encompassing engine systems, landing gear components, cargo solutions, interior assemblies, structural elements, and precision turning applications. Strategic acquisitions of T&K Machine in the United States and France's SIRA Group during 2016-17, coupled with joint venture formations, have substantially enhanced the company's geographical diversification and product portfolio breadth.

Financial Performance Trajectory

Revenue expansion registered a modest 6.7% compound annual growth rate between fiscal 2023 and 2025, propelled primarily by aerospace segment momentum that counterbalanced consumer segment contraction. EBITDA demonstrated significantly superior growth at 46% CAGR during this period, reflecting the enhanced contribution from higher-margin aerospace operations, which deliver 15-16% EBITDA margins compared to losses in the consumer division. Nevertheless, the company has sustained net losses throughout this timeframe, attributable to substantial interest expenses and depreciation charges that overwhelm operating profitability gains.

The aerospace segment's dominance in the revenue mix has intensified, now constituting approximately 89% of total sales, while export orientation remains equally pronounced. Return on capital employed improved incrementally from negative 3.7% in FY23 to 1.8% in Q1FY26, indicating gradual operational efficiency enhancement, though still suboptimal compared to industry benchmarks.

Public Offering Structure and Capital Deployment

The initial public offering comprises an offer-for-sale transaction totaling approximately Rs 922 crore at the upper price band of Rs 124 per equity share. Institutional investors receive 75% allocation, while non-institutional and retail participants obtain 15% and 10% respectively. The subscription window commenced December 3 and concludes December 5, 2025, with shares trading in market lots of 120 units. Upon listing at the upper band, Aequs would command a market capitalization approximating Rs 8,300 crore, translating to a market cap-to-sales multiple of 9.0 based on FY25 revenues.

Promoter shareholding will dilute from 64.5% pre-issue to 59.1% post-offering, while public float expands correspondingly to 40.9%. Net proceeds earmarked Rs 433 crore for debt repayment and prepayment penalties, alongside Rs 64 crore designated for capital expenditure initiatives. This capital allocation strategy underscores the company's prioritization of balance sheet deleveraging—critical given the net debt-to-equity ratio of 1.0 as of FY25—over aggressive capacity expansion.

Investment Considerations and Risk Assessment

Favorable Dynamics: The global aerospace manufacturing sector experiences robust tailwinds driven by commercial aircraft production ramp-ups, defense modernization programs, and supply chain localization initiatives. Aequs' established relationships with industry titans, combined with certified infrastructure and technical expertise in precision manufacturing, position the enterprise favorably to capture incremental demand. The company's integrated capabilities across multiple manufacturing processes create switching costs for clients and competitive moats difficult for new entrants to replicate.

Cautionary Factors: Working capital intensity represents a significant operational challenge, with the cash conversion cycle extending to 253 days in FY25—substantially elevated and indicative of prolonged receivables collection periods or inventory holding requirements. Customer concentration risk merits scrutiny, as the top three clients collectively account for approximately 54% of revenues, creating vulnerability to contract losses or pricing pressures. Profitability at the net income level remains elusive despite operational margin improvements, constrained by high depreciation burdens from capital-intensive manufacturing and interest obligations from historical debt accumulation.

The consumer segment's persistently weak performance and loss-making status raises questions regarding management's capital allocation decisions and strategic focus. Availability of critical aerospace-grade raw materials and components, often subject to supplier qualification processes and geopolitical supply chain disruptions, constitutes an additional operational risk factor. Furthermore, the aerospace industry's cyclical nature and extended product development timelines could impact near-term revenue visibility.

Valuation Metrics and Research Perspective

At the upper price band, Aequs trades at 9.0 times FY25 sales—a premium valuation considering the absence of profitability and negative return ratios. The company reported earnings per share of negative Rs 1.8 in FY25, rendering traditional price-to-earnings comparisons inapplicable. Market cap-to-sales multiples have compressed from 10.2 times in FY23 to projected 7.7 times based on Q1FY26 annualized revenues, suggesting some normalization, though still elevated for a loss-making enterprise.

ICICI Securities' UNRATED designation reflects ambivalence regarding investment merit—neither recommending subscription nor explicitly advising avoidance. This neutral stance acknowledges both the compelling aerospace industry backdrop and structural company-specific challenges that cloud near-term profitability prospects. Investors seeking exposure to India's aerospace manufacturing evolution may find appeal, particularly with long-term horizons exceeding two years, though must accept elevated risk profiles associated with negative cash flows, leverage, and execution uncertainties surrounding the consumer segment turnaround narrative.

Target Expectations and Strategic Outlook

Given the UNRATED recommendation, ICICI Securities has not established formal price targets or subscription levels for investors. The research house's cautious posture suggests awaiting greater financial stability and profitability demonstration before committing capital. For risk-tolerant investors proceeding despite these reservations, entry at the lower price band of Rs 118 would provide marginally superior risk-reward characteristics compared to the Rs 124 upper limit.

The company's trajectory hinges critically on sustaining aerospace segment growth momentum while arresting consumer division deterioration. Successful debt reduction through IPO proceeds should alleviate interest burdens, potentially accelerating the path to net profitability.