Afcons Infrastructure IPO: Should you subscribe to the ₹5,430 crore issue opening today?

The initial public offering (IPO) of Mumbai-based Afcons Infrastructure Ltd. is opening for subscription today, October 25. The three-day bidding process will conclude on October 29. Through the public offer, the company plans to raise about ₹5,430 crore.

Ahead of the issue opening, the Shapoorji Pallonji group company has raised ₹1,621 crore from anchor investors such as GIC, HDFC Mutual Fund, ICICI Prudential MF, BlackRock, Fidelity Investments, Goldman Sachs, HSBC Group, Nomura AM, among others.

Afcons Infrastructure IPO review

Marwadi Financial Services: Subscribe

The brokerage firm has assigned a ‘Subscribe’ rating to this IPO as the company has a diversified orderbook across geographies, clients, and business verticals, longstanding relationships with clients globally. Also, the issue is available at reasonable valuation as compared to its peers.

KR Choksey: Subscribe

In light of Afcons Infrastructure’s robust growth potential, solid financial performance and strategic initiatives aimed at market expansion, brokerage firm KR Choksey has recommended a ‘Subscribe’ rating for the company.

The brokerage said that the company is positioned for a favourable valuation. The IPO is pegged at a price-to-earnings multiple of 36 times.

SBI Securities in its note said the company, at lower and upper price band of ₹440 and ₹463, is valued at a P/E multiple of 36.1 times and 37.9 times of its FY24 consolidated earnings, respectively, based on post issue capital.

The company also has demonstrated healthy financial performance as revenue, EBITDA, and profit grew at CAGR of 9.7%, 20.8%, and 12.1%, between FY22-FY24 to ₹13,267.5 crore, ₹1,365.0 crore, and ₹449.7 crore, respectively.

Mehta Equities: Subscribe for long term

Rajan Shinde of Mehta Equities believes that the Afcons Infrastructure IPO brings investors an opportunity to invest in a flagship construction company of the Shapoorji Pallonji Group, supported by a strong track record of executing large and complex projects both in India and internationally.

Shinde said the company’s advanced equipment base and proven execution capabilities and strategic market position make them a key player in infrastructure sectors.

Mehta Equities has recommended investors to ‘Subscribe’ to Afcons Infrastructure IPO for long-term perspective only.

Afcons Infrastructure IPO price band

The company holds its shares in the fixed price band of ₹

440-463 per share, where the investors can bid for a minimum of 32 equity shares and its multiples thereafter.

The IPO comprises of a fresh issue of 2.7 crore shares worth ₹1,250 crore, along with an offer for sale (OFS) component of 9.03 crore shares aggregating to ₹4,180 crore.

The proceeds from the OFS will be received by the selling shareholder and Afcons will not receive any proceeds from it. Goswami Infratech, a promoter group company, is selling shares via the OFS.

Afcons Infrastructure IPO objective

Of the total fresh issue proceeds, Afcons has proposed to utilise ₹80 crore for capital expenditure towards the purchase of construction equipment. It will use ₹320 crore towards funding long-term working capital requirements.

Around ₹600 crore will be used for prepayment or scheduled repayment of a portion of certain outstanding borrowings. The remaining funds will be for general corporate purposes.

Afcons Infrastructure will have a post-listing market capitalisation of ₹17,029 crore at the upper end of the price band.

Afcons Infrastructure IPO structure

About 50% of the issue has been reserved for institutional investors, while 15% of the issue is reserved for non-institutional investors. The remaining 35% of the offer has been kept aside for retail investors.

The company has already raised ₹2,967 crore from a number of investors. The pre-IPO book included names such as GIC Singapore, Enam Holdings (Akash Bhanshali), Synergy Capital, 360 One, M&G Investments, Think Investments, Discovery Capital Management, Artian Investment from ArcelorMittal, Madhusudan Kela, White Oak and more.

Established in 1959, Shapoorji Pallonji group firm Afcons Infrastructure has a legacy of over six decades. It has verticals like marine and industrial projects; surface transport projects; urban infrastructure projects; Hydro and underground projects; and oil & gas projects.

For the June quarter, Afcons has reported a net profit of ₹91.59 crore with a revenue of ₹3,213 crore. The company posted a net profit of ₹449.76 crore with a revenue of ₹13,646.88 crore for the financial year ended on March 31, 2024.

The company’s orderbook stood at ₹31,747 crore at the end of June 2024.

Afcons doesn’t pay any royalty brand and strategic support services to the SP Group since FY23–FY24 onwards.

ICICI Securities, DAM Capital Advisors (formerly IDFC Securities), Jefferies India, Nomura Financial Advisory and Securities (India), Nuvama Wealth Management and SBI Capital Markets are the book running lead managers of the Afcons Infra IPO, while Link Intime India is the registrar.

The allotment of shares for the Afcons Infrastructure IPO is expected to be finalised on October 30, while the company will be listed on both BSE and NSE on November 4.