Aequs moves to reshape its capital structure

The ₹650 Cr warrant issue does not have a publicly reported rupee split between debt reduction and capex. Aequs has described the proceeds broadly as funding aerospace and consumer-capacity expansion and supporting its borrowing programme, rather than earmarking a specified amount for repayment of existing debt. ^[1]

What is specified

• Total warrant issue: approximately ₹650 Cr. ^[1]
• Upfront payment: ₹325 Cr, or 50% of the issue size, payable on warrant allotment. ^[2]
• Balance payment: approximately ₹325 Cr payable when the warrants are exercised. Warrants may be exercised within 18 months of allotment. ^[3]
• Use of funds: aerospace and consumer capacity expansion, including the broader capex programme, while also supporting the company’s borrowing programme. ^[1]
• Borrowing timeline: management indicated that the equity infusion would support raising an additional ₹800 Cr of fresh debt during the year. ^[4]
• Capex horizon: the broader USD 450 million capex plan is targeted for 2031; this is the overall strategic plan and not a disclosed schedule for spending the ₹650 Cr alone. ^[4]

Bottom line: the portion specifically earmarked for debt reduction is not confirmed, and the portion specifically earmarked for new capex is also not separately quantified. The disclosed structure is ₹325 Cr upfront plus the balance on exercise, with deployment linked to capacity expansion and the associated borrowing programme. Actual deployment is therefore expected to occur in stages, beginning with the upfront allotment proceeds and extending through the 18-month warrant-exercise window; a project-by-project cash deployment schedule was not reported.

Full conversion would add 28.07 million shares, equivalent to approximately 4.0% dilution of the post-conversion equity base. Relative to the current share count, the new shares represent approximately 4.2%.

• Warrants: 28,071,690, with each warrant convertible into one equity share ^[2].
• Current shares outstanding: 670,665,635.
• Post-conversion shares: approximately 698.74 million, derived from current shares plus warrants.
• Dilution: 28.07 million ÷ 698.74 million = 4.0% of the expanded equity base. On a pre-issue share-count basis, the increase is 4.2%.

The disclosed issue price is ₹231.55 per warrant/share ^[5], versus the current book value per share of ₹2.08 in Q2 FY27 ^[6]. Therefore:

• Issue price is approximately 111.3 times book value per share.
• The issue price is ₹229.47 above book value, representing an approximate 11,032% premium to book value.

This means the proposed issue is priced substantially above the company’s current accounting book value per share; the principal dilution effect is the approximately 4.0% increase in the fully diluted equity base.

Verdict: The ₹650 Cr promoter-led warrant issue is not a move away from external debt. It is designed to provide the equity base for a larger borrowing programme. Aequs already carries the highest gross debt-to-equity ratio in the selected peer set at 0.40x, and its TTM net debt-to-EBITDA of 3.36x is materially above the low-leverage or net-cash position of most peers. The proposed equity therefore cushions the planned borrowing but does not imply deleveraging.

Leverage versus the selected peer set

The comparison uses consolidated figures. Aequs, Lloyds, LMW and Triveni have Q2 FY27 data; Azad and SETL have Q1 FY27 as their latest reported period.

Aequs is highest on gross debt/equity at 0.40x, versus 0.30x for Azad, 0.15x for Triveni, 0.14x for Lloyds, 0.07x for SETL and zero for LMW. The net debt/equity comparison also places Aequs at the upper end, tied with Azad at 0.28x. Azad’s 6.36x and SETL’s 1.14x net debt/EBITDA ratios are based on Q1 rather than TTM data, so they should not be ranked directly against Aequs’s 3.36x TTM figure.

Aequs’s leverage also increased during FY27: total debt rose 39.1% QoQ and net debt rose 282.3% QoQ ^{[29] [30]}. At Q2 FY27, total debt was ₹561.19 Cr and net debt ₹390.22 Cr ^{[31] [32]}. The sharp quarterly net debt/EBITDA ratio of 15.95x is partly a denominator issue; Q2 EBITDA was only ₹24.47 Cr ^[33], compared with TTM EBITDA of ₹116.17 Cr ^[34].

What the promoter infusion signals

Aequs’s board approved up to ₹650 Cr of promoter-group warrants, with ₹325 Cr payable upfront and the balance on exercise, subject to shareholder and regulatory approvals ^[1]. The company’s stated purpose includes supporting its borrowing programme ^[1]. Separately, the CEO was reported as targeting ₹800 Cr of fresh debt during the year to accelerate a USD 450 million capex programme ^[4].

This makes the financing strategy clearer:

• The equity issue is an enabler for debt-funded expansion, not a debt-reduction transaction.
• The promoter is committing capital ahead of the borrowing programme, increasing the equity contribution available against new projects.
• The strategic posture is shifting toward a mixed capital structure: promoter equity for the base and external debt for capacity expansion in aerospace and consumer components.
• Execution and EBITDA ramp-up become more important, because Aequs has negative TTM PAT of ₹202.02 Cr despite ₹116.17 Cr of TTM EBITDA ^{[35] [34]}.

As a static illustration, if the full ₹650 Cr warrant issue converts and the planned ₹800 Cr debt is added, gross debt/equity would be approximately 0.67x, derived from current Q2 debt of ₹561.19 Cr ^[31], current equity of ₹1,393.1 Cr ^[36], plus the proposed equity and debt amounts ^{[1] [4]}. This is not a forecast and excludes capex deployment, earnings growth, working-capital movements and timing effects; it nevertheless indicates that Aequs would remain more leveraged than the current peer group.

Conclusion: The transaction signals a deliberate increase in external-debt capacity, supported by promoter equity. It does not yet establish a permanent leverage target or debt policy: the final warrant subscription, debt drawdown schedule, interest cost, covenants and project-level repayment structure could not be confirmed from the cited material.