Unlisted shares of Azad Engineering are currently trading Rs 370 higher in the grey market, which is a 70.61 per cent listing gain from the public issue
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Azad Engineering IPO: The initial public offering of Azad Engineering Ltd (AEL), which is going to be closed on Friday, December 22, has received a decent investor response. Till 10:52 am on the final day of bidding on Friday, the Rs 740-crore IPO received 13.99 times subscription, garnering bids for 13,75,30,204 shares as against 98,32,042 shares on offer.
The category meant for non-institutional investors received 30.29 times subscription, while the quota for retail individual investors (RIIs) got subscribed 13.98 times. The quota for qualified institutional buyers (QIBs) got subscribed 1.56 times.
The IPO was opened for public subscription on Wednesday, December 23. The IPO allotment will take place on December 26, while its listing will take place on December 28 on both BSE and NSE.
Azad Engineering IPO GMP Today
According to market observers, unlisted shares of Azad Engineering are currently trading Rs 370 higher in the grey market as compared with its issue price. The Rs 370 grey market premium or GMP means the grey market is expecting a 70.61 per cent listing gain from the public issue. The GMP is based on market sentiments and keeps changing.
‘Grey market premium’ indicates investors’ readiness to pay more than the issue price.
Azad Engineering IPO: Should You Subscribe?
Assigning a ‘Subscribe’ rating to the IPO, brokerage firm Reliance Securities in a note said, “AEL is one of the fastest growing manufacturers with one of the highest EBITDA margins among the key players, backed by marquee investors, unique business model, strong TAM in various segments over the next few years, consistent track record of financial performance suggests a SUBSCRIBE rating for the long term.”
Canara Bank Securities also gave a ‘Subscribe’ rating to the IPO. It said Azad Engineering’s high-entry barrier comes from original equipment manufacturers’ (OEMs) demanding qualification procedures. It’s a business that requires more than just money to succeed. The company has a solid track record, a strong business plan, and management experience that has produced positive results in the past.
“The revenue of the company grew at a CAGR of 43 per cent between FY2021 and FY2023 and PAT margin grew at a CAGR of 49 per cent between FY2021 and FY2023. While valuation of the company stands at 292.7x P/E which appears fully priced as compared to peers. We recommend to subscribe for listing gain,” Canara Bank Securities said.
Azad Engineering IPO Details
The price band of the Azad Engineering IPO has been fixed at Rs 499-524 per share. The minimum lot size for an application is 28 shares. The minimum amount of investment required by retail investors is Rs 14,672.
Ahead of the IPO, Azad Engineering Ltd collected Rs 221 crore from anchor investors.
For the IPO, Hyderabad-based Azad Engineering announced Rs 499-524 as the price band. At the upper end of the price band, the 15-year old company will mop up Rs 740 crore from the market which values it at close to Rs 3,000 crore.
The Initial Public Offering (IPO) comprises Rs 500 crore of Offer For Sale (OFS) component by promoters and external investors, who are completely exiting the company. The remaining Rs 240 crore will be raised through fresh issue of shares, the company’s Chairman and Managing Director Rakesh Chopdar told PTI here on Friday.
He said the external investors who are existing the company are Piramal Structured Credit Opportunities Fund which will sell the shares for Rs 261 crore. It had had invested Rs 160 crore in August 2022.
DMI Finance, which was first to acquire stake in the firm in July 2021, will sell its 1.2 per cent shareholding for around Rs 34 crore.
Chopdar said he will be selling shares worth Rs 204 crore in the OFS, following which his holding in the company will come down to 68 per cent from the pre-issue holding of 78 per cent.
The company proposes to utilise the proceeds from the offer to part fund capital expenditure for its Rs 280 crore expansion by setting up two units towards the end of the next fiscal and for repaying/pre-paying debt of around Rs 90 crore.
Chopdar said that even after the IPO, the company will continue to have external investors in the form of HNIs (High Networth Individuals) who include sport stars like Sachin Tendulkar, P V Sindhu and Saina Nehwal.
Together, these HNIs and the employees will own around 12 per cent in the firm.
The company nets over 80 per cent of its revenue from exports to 15 global markets.
In FY21, its topline stood at Rs 122.7 crore from which it had earned Rs 37 crore of net income.
The revenue rose to Rs 194 crore and net income to Rs 42 crore in FY22.
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In the last fiscal, the company’s revenue increased to Rs 251 crore and net income was at Rs 79 crore.
In the first six months of the current fiscal, its top line reached Rs 158 crore and the bottom line stood at Rs 29 crore, the company’s Whole Time Director Vishnu Malhani said.
In the energy space the company boasts of international clients like Siemens, GE, Honeywell, Mitsubishi, Eaton and Mann.
