Grey market cheers Aditya Infotech IPO with 33 per cent premium – should you subscribe?

About the Issue:  

Aditya Infotech Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. See the issue details below.

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Prepayment and/or repayment of all or a portion of certain outstanding borrowings availed by the company

2. General corporate purposes

Promoter holding 

Hari Shanker Khemka, Aditya Khemka, Ananmay Khemka, Rishi Khemka and Hari Khemka Business Family Trust are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 92.58 per cent in the company.

Company Profile  

The company offers a comprehensive suite of advanced video security and surveillance products, technologies, and solutions under its well-recognized ‘CP PLUS’ brand, catering to both enterprise and consumer segments.

The company’s product portfolio includes smart home IoT cameras, HD analog solutions, intelligent network cameras, body-worn cameras, thermal imaging devices, long-range IR cameras, and advanced AI-powered solutions featuring technologies such as automatic number plate recognition, people counting, heat mapping and mobile/on-board surveillance systems.

It also provides integrated security systems and Security-as-a-Service solutions, delivered directly and through its distribution network, addressing the needs of diverse sectors such as banking, insurance, real estate, healthcare, defence, education, hospitality, manufacturing, retail, and law enforcement.

In FY25, the company offered 2,986 stock keeping units (SKUs), classified across professional, consumer, and surveillance-aligned product categories. To strengthen its reach, the company has established 69 dedicated CP PLUS Galaxy stores, operated by its distributor network, and operates 10 strategically located warehouses across India as of March 31, 2025.

Financials 

The company has consistently demonstrated robust topline growth, clocking a 16 per cent CAGR in revenue between FY23 and FY25. While the bottom-line also showed notable improvement, the sharp profit surge in FY25 was largely driven by a one-time exceptional item. Adjusting for the exceptional item and taxation, the profit figure may come out around Rs 164 crore, which shows growth of around 42 per cent on yearly basis. 

Looking ahead, profitability is expected to strengthen further as the company intends to utilize the net proceeds from the fresh issue to repay more than 90 per cent of its outstanding loans, significantly reducing its interest burden.

Valuation & Returns 

The company has stated that there are no listed peers in India offering a comparable mix of business segments and services. As a result, a direct industry comparison is not feasible.

The issue is priced with a P/BV ratio of 7.06 times, calculated using its Net Asset Value (NAV) of Rs 95.64 as of March 31, 2025. At the upper price cap, it is priced at a P/BV ratio of around 5.21 times, considering its post-IPO NAV. Considering the company's FY25 earnings and fully diluted equity capital, the price-to-earnings (P/E) ratio is calculated at around 20x. Adjusting for exceptional item, it comes to around 40x.

In FY25, the company reported a strong financial performance, achieving a return on equity (RoE) of 35 per cent and a return on capital employed (RoCE) of 33 per cent. Considering both valuation and returns, the issue appears attractively priced and is likely to garner investor interest as a first mover in its segment post listing.

Outlook

On the risk front, the company imports a notable portion of its parts and materials primarily from China, making it vulnerable to import restrictions or fluctuations in global commodity prices, which could impact its operations. Additionally, the company relies heavily on manufacturing synergies with AIL Dixon Technologies India Pvt Ltd and Dixon Technologies (India) Ltd. Any disruption in these partnerships could adversely affect its business and production capabilities.

On a brighter side, the company enjoys a first-mover advantage, being among the few certified Indian brands positioned as immediate legal suppliers of IP cameras. With the Public Procurement Order mandating STQC certification, certified domestic players gain exclusive access to high-value government projects in critical sectors such as railways, smart cities, and defence. In contrast, foreign brands face significant entry barriers due to high compliance costs and prolonged certification timelines.

Backed by strong multi-sector demand, a notable market share, early moving advantage, consistent financial performance, and limited competition due to high entry barriers, the company’s long-term growth outlook appears promising.

Hence, we recommend subscribing to the issue from a long-term investment perspective.