Titanium Supply Constraints For Aerospace Industry Almost Resolved: Aequs

 IPO-bound contract manufacturer Aequs on Friday said the titanium supply constraints being faced by the aerospace industry are moving towards the tail-end, and the company has made some adjustments to deal with the situation.

The Russia-Ukraine war has resulted in global supply chain disruptions, especially for the aerospace industry, as Russia is a major source of titanium.

Aequs, a contract manufacturer of aerospace components, toys and consumer durables, has set a price band of ₹118-124 per share for its ₹922-crore initial public offering that will open for subscription on December 3.

At a briefing here, Aequs Chairman and CEO Arvind Melligeri said that some challenges have always been there for the aerospace industry, and the company has the ability to navigate them. "Our customers have been able to manage, and we have been able to manage. And we have to make some adjustments to do that," he added.

"In my view, constraints, which came out of the titanium (supply) due to the Ukraine war, are almost addressed. We are pretty much towards the tail end of that." At the upper end of the price band, the company will be valued at over ₹8,300 crore.

The initial share-sale will open for subscription on December 3 and close on December 5, with anchor investors set to receive their allocation on December 2, Aequs said in a public announcement.

The supply chain constraints have been hitting commercial aircraft upgradations and deliveries.

Russia is a big supplier of raw materials, such as titanium, nickel and aluminium, for the aerospace industry.

A recent study by IATA and consulting firm Oliver Wyman said supply chain challenges are estimated to cost more than USD 11 billion for the global airlines industry in 2025.

The slow pace of production is projected to cost the airline industry over USD 11 billion this year, mainly due to excess fuel, additional maintenance, increased engine leasing and surplus inventory holding costs, according to the study released in October.

"So, ultimately, everything is somehow managed to make sure that delivery happens. Because everybody's single-minded goal is to make sure aircraft get delivered to the customer," Melligeri said.

The IPO comprises a fresh issue of shares worth ₹670 crore, along with an offer for sale (OFS) of 2.03 crore shares valued at ₹252 crore by promoters and existing investors, taking the total issue size to ₹922 crore.

Funds raised from the fresh issue would be used for repaying loans taken by the company and its two subsidiaries -- AeroStructures Manufacturing India and Aequs Consumer Products; purchasing machinery and equipment for the company and AeroStructures; and supporting future growth through potential acquisitions, other strategic initiatives, and for general corporate needs.

Aequs initially filed confidential draft papers with Sebi in June and secured approval in September to launch the IPO.

It primarily operates in the aerospace segment, but over the years, it has expanded its product portfolio to include consumer electronics, plastics, and consumer durables.

Its consumer products include cookware and small home appliances, while its plastics offerings include outdoor toys, figurines, toy vehicles, and components for consumer electronics, such as portable computers and smart devices.

The company is backed by prominent investors, including Amicus Capital, Amansa Capital, Steadview Capital, Catamaran -- the family office of Infosys founder NR Narayana Murthy, and Sparta Group.

Its key clients are Airbus, Boeing, Bombardier, Collins Aerospace, Spirit AeroSystems Inc., Safran, GKN Aerospace, Mubea Aerostructures, Honeywell, Eaton, and Sabca in aerospace, Hasbro, Spinmaster, Wonderchef, and Tramontina.

Aequs ALSO operates manufacturing facilities across India, France, and the USA.

In India, the company runs three manufacturing clusters in Belagavi, Hubballi, and Koppal in Karnataka.

Founded by Melligeri, who has decades of experience in the aerospace sector, was a co-founder of Quest Global Engineering.