Apsis Aerocom IPO Review

Apsis Aerocom Limited is launching its SME IPO on the NSE Emerge platform with a fresh issue of 32.52 lakh equity shares at an issue price band of ₹104 to ₹110 per equity share. The total issue size is approximately ₹35.8 Crs. The issue is proposed to open on March 11, 2026, and will close on March 13, 2026. The company is into precision aerospace and engineering components manufacturing from Bengaluru. The issue is proposed to raise capital expenditure on machinery and equipment. The company's market capitalization is ~ ₹132 Crs. at the upper end of the issue price band. The IPO is priced at ~P/E 20x FY26 (E) EPS.

The Opportunity and The Risks

Precision Engineering & Aerospace Components: A High-Barrier Manufacturing Industry

Apsis Aerocom Limited is in the Precision Engineering & Aerospace Components Manufacturing industry, providing machined components used in Aerospace & Industrial Engineering applications. The Aerospace & Defence manufacturing industry in India is in its growth phase, with many Global OEMs diversifying their supply chain & increasing procurement from Indian companies as part of initiatives like 'Make in India' & 'Defence Indigenisation.

India’s Aerospace & Defence manufacturing industry is expected to touch $ 70 Billion by 2030, driven by Aircraft, Defence procurement, & export opportunities. Precision machining companies play an important role in this supply chain, as these companies manufacture critical structural & mechanical parts of an aircraft.

Unlike other industries, Aerospace Components Manufacturing is a high-barrier industry, requiring high precision, sophisticated CNC machines, & quality parameters. The qualification process is long & tedious, but once qualified, Aerospace Suppliers can command better margins compared to other industries.

For Precision Engineering companies, EBITDA margins vary between 15% & 25%. Profitability is dependent on efficiency, technology, & customer relationships. Precision engineering companies in India, being small & medium enterprises, require continuous investment in capital expenditure in terms of upgrading & renewing machinery & technology.

Business Model

Apsis Aerocom: Precision Manufacturing with Capex-Driven Growth

Apsis Aerocom Limited is a Precision Engineering Manufacturing company with its plant located in Peenya Industrial Area, Bengaluru, one of the prominent Aerospace & Industrial Manufacturing hubs in India. The company is focused on Precision Machined Components & Assemblies for Aerospace & Industrial applications.

This is a business model in which there is the manufacturing of precise parts using engineering techniques. The company earns revenue by selling these parts to customers. The company’s growth is dependent on its capacity utilisation, machine utilisation, and repeat orders.

Precision engineering companies usually grow by adding more advanced engineering equipment to their plant. The company is using the IPO funds to add new equipment to its plant. This will improve its manufacturing capabilities.

Structural Characteristics

Apsis Aerocom is a company that follows a capex-driven model, in which its growth is dependent on adding capacity to its plant.

Revenue growth is achieved by:

• Increasing manufacturing capacity

• Increasing CNC equipment

• Increasing engineering orders

The IPO aims to raise ~₹35.77 Cr through a fresh issue of 32.52 lakh shares, primarily for machinery purchases and capacity expansion.

Business Segments

Precision Engineering Manufacturing as the Core Revenue Driver

Apsis Aerocom primarily derives revenue from precision engineering manufacturing activities. The business is more production-driven than trading-driven. Hence, revenue growth is more dependent on increasing manufacturing capacity and precision engineering orders.

Core Revenue Generating Segment

Precision Machined Components

The business derives revenue from precision-machined components and assemblies produced with specialised CNC manufacturing processes and supplied to industrial and aerospace companies requiring precision engineering products. The business is more focused on precision engineering manufacturing than precision machining. The revenue growth is more dependent on increasing manufacturing capacity and precision engineering orders.

Cost Structure and Operating Mix (FY25)

• Manufacturing & Operating Expenses: This is the largest component of total cost.

• Employee Expenses: This is low as the company has automated operations and specialised machining.

•  Finance Costs: This is moderate in relation to revenue size.

• Other Operating Expenses: This includes electricity costs, machining operations, etc.

• EBITDA: ₹4.78 Cr.

• EBITDA Margin: 35%.

Unlike commodity-based manufacturing industries like cement, steel, etc., precision engineering services rely more on machine utilisation, engineering skills, and manufacturing efficiency rather than raw material cost arbitrage.

Operating Leverage and Growth Dynamics

The company has shown high profitability in relation to its size.

From the financials, it is clear that it is a high-margin but low-scale engineering services company. For growth, it would need to expand capacity or acquire more engineering contracts.

Revenue growth in precision engineering services comes from:

• Increased utilisation of existing machines.

• Increased capacity with new CNC machines.

• Increased relationships with industrial and aerospace clients.

But capacity growth comes at the cost of continuous capital expenditure on equipment. Thus, growth is linked to capex funding.

Apsis Aerocom is a precision manufacturing company that operates a capex-driven business model. Unlike other processing businesses, the company's profitability is based on technical capabilities, production efficiency, and the utilisation of precision machinery.

Although the company has a high EBITDA of ~35%, the business is small in size. However, the company's future growth will depend on the following factors:

• Increasing the company's manufacturing capacity

• Increasing the size of engineering contracts

• Maintaining high utilisation rates of precision machinery

• Increasing investment in advanced machinery

Primary Business Strategy

1. Increasing Capacity through Capital Expenditure

The company intends to use the funds raised from the IPO mainly for the purchase of new machinery and equipment. Increasing the number of CNC machines will help the company increase production capacity and efficiency, allowing the company to take up larger engineering contracts.

2. Increasing Manufacturing Capabilities

The precision engineering business depends on the company's ability to perform high-precision engineering and the utilisation of advanced machinery. Increasing investment in advanced machinery will help the company improve the quality of products, efficiency in production, and the ability to compete in the engineering business.

3. Increasing Scale through Production Volumes

The company's growth will be mainly volume-driven, and the company will be able to increase the volume of production by utilising the new machinery. Precision engineering businesses that operate advanced machinery will have high operating leverage.

4. Increasing Financial Flexibility

The company has cash reserves of only ~₹0.14 Cr. However, the company will be able to increase its financial flexibility through the funds raised from the IPO.

Promoters

Apsis Aerocom Limited is promoted by Basavaraju Kanakatte Shivakumar, Mihir Kumar Pradhan, and Vinod Kumar Mariyappan, who together provide guidance in steering the company’s future course. The company’s inception dates back to its precursor, a partnership firm under the name ‘Apsis Latitude,’ formed in 2012, which was later converted into a corporate entity in 2022.

Basavaraju Kanakatte Shivakumar, who is currently the Managing Director, is responsible for overseeing manufacturing as well as growth strategies. Mihir Kumar Pradhan, who is currently the Chairman, is responsible for strategic inputs as well as industry connections. Vinod Kumar Mariyappan, who is currently the Whole Time Director, is responsible for overseeing operational as well as manufacturing activities.

Under the guidance of its promoters, the company has achieved a strong presence in the industry as a manufacturer of precision engineering products, with revenue of ~₹13.65 Cr in FY25, EBITDA of  ₹4.78 Cr, as well as PAT of  ₹3.12 Cr.

Under its promoter group, after listing via an IPO, it is expected that the promoter group will hold a majority of 73%.

Promoter Holding

Capital Intensity & Asset Structure
The precision engineering manufacturing model adopted by Apsis Aerocom can be classified as a capital-intensive business model. Precision engineering is a capital-intensive business, and the main source of growth for capital-intensive businesses comes from investment in infrastructure. The company has reported a revenue of around ₹13.65 Cr for FY25. The company has a total asset base of around ₹42.39 Cr.

Unlike commodity processing businesses, in precision engineering businesses, a higher proportion of capital is invested in fixed assets. The main source of growth for precision engineering businesses comes from continuous investment in machinery and equipment, and efficient utilisation of the same to achieve higher returns.

Asset-Heavy Manufacturing Model
Apsis Aerocom is a precision engineering manufacturing business that has adopted the production model. Precision engineering businesses have a high fixed asset to revenue ratio. Precision engineering businesses have a high fixed asset to revenue ratio because the company has invested in CNC machines and other equipment, which form a part of the fixed asset base.

The company has reported a high asset base of around ₹42.39 Cr, considering the company has reported a revenue of around ₹13.65 Cr. This indicates that the company has already invested in the business.

Balance Sheet & Leverage Profile
As of FY25, the company has a respectable net worth of ₹17 to ₹18 Cr, considering a total asset base of ₹42.39 Cr. The company has a moderate leveraged capital structure, which is a common phenomenon for manufacturing companies. The company has a moderate leveraged capital structure because it has adopted a manufacturing business.

However, the cash and cash equivalent position of the company is at a meagre figure of ₹0.14 Cr. This shows that the company’s capital is invested in infrastructure.

Cash Flow Sensitivities

Engineering manufacturing firms are often faced with cash flow problems despite their high profitability level. The reason behind this is the high capital costs involved in the expansion of the business. In the case of Apsis Aerocom, the company is enjoying high profitability; however, the company needs high capital costs to invest in more machines to increase the overall production capacity.

Profitability Matrix

From the financials of Apsis Aerocom, it is evident that the company’s profitability level is high for a company of such a small scale. The financials of the company for the year FY25 show that the revenue generated by the company is ₹13.65 Cr, EBITDA is ₹4.78 Cr, EBITDA margin is 35%, PAT is ₹3.12 Cr, and the net margin is between 22 and 23%.

All these figures are extremely high for the traditional manufacturing industry. This shows that the company’s products are able to add value to the overall product lifecycle.

From the financials of the company, it is evident that the company’s profitability level is high because of the high efficiency level in the manufacturing sector. When the company invests in more machines to increase the overall production capacity, the company will be able to benefit from the high machine utilisation.

From the financial snapshot, it is evident that the company is generating high operating margins compared to its revenue. This is due to the nature of its business: it is a precision engineering company.

Peer Comparison

Sector Specific Ratios

Revenue from operations has grown from ₹10.37 Cr in FY23 to ₹20.49 Cr in FY25, with a two-year compound annual growth rate of approximately 40%. EBITDA margin for the company stands at around 49.8% in FY25, while the ROE is over 90%. The profitability of the company has shown significant growth over the last three years with the scaling of the manufacturing operations. However, the scale of the company is still relatively low and dependent upon the continuous utilisation of the manufacturing capacities. 

LMVT Framework

The promoter group has over a decade of experience in the precision engineering and aerospace component manufacturing industry, having started the business as a partnership concern and then evolving into a corporate entity. The revenue growth of the company has been steady over the last three years, while profitability has shown significant growth. Now, with the company moving into the public domain, the most important factor for the company will be the efficient utilisation of capacities and the ability to strengthen the customer relationships in the industrial and aerospace segments.

Moat

For the precision engineering and aerospace components industry, the overall entry barriers for the industry are considered to be medium. This is mainly due to the high capital costs involved in the acquisition of CNC machines. For the industry to survive, the companies must adhere to high manufacturing tolerances. For the industry to gain a competitive advantage, it must rely on technical expertise and precision in the manufacturing process. Over time, the scale of the business, the quality of the products manufactured, and the technical expertise to handle complex engineering requirements will provide a competitive advantage.

Valuation

At the IPO price of ₹110 per share, the issue appears to be valuing the company at a P/E ratio of 14 to 15 times its FY25 earnings. In comparison to the listed peers in the aerospace industry and the precision engineering industry, the valuations appear to be reasonable. However, the company’s scale is much lower compared to the listed peers. The balance sheet appears to be robust with high leverage and a high asset base due to the company’s investment in production infrastructure. 

Tailwinds

India’s aerospace and defence manufacturing sector is expected to grow manifold in the coming years due to the “Make in India” initiative. The country’s defence sector is expected to increase the indigenisation of defence products. Due to the increase in the number of defence manufacturing facilities in the country, the overall demand for precision engineering will increase. 

Conclusion

Apsis Aerocom is part of the precision engineering and manufacturing of aerospace components industry, an industry that is small in size but provides higher margins compared to the general manufacturing industry. The revenue growth has been strong over the FY23-FY25 period, supported by substantial growth in operating margins and return ratios. 

Based on the current valuation, the IPO is fairly valued in relation to the profitability profile of the company; however, investors need to be cautious of the risks associated with investing in small-scale manufacturing businesses.