Afcons Infrastructure launched its initial public offering (IPO) for bidding today, that is Friday, October 25 and the bidding for the issue will conclude on Tuesday, October 29. The infra company shall be offering its shares in the fixed price band of Rs 440-463 apiece, which can be applied for a minimum of 32 equity shares and multiples thereafter.
Afcons Infrastructure, Incorporated in 1959, is an infrastructure engineering and construction company of the Shapoorji Pallonji group, with 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.
The Rs 5,340 crore IPO of Afcons Infrastructure includes a fresh share sale of Rs 1,250 crore and an offer-for-sale (OFS) of up to Rs 4,180 crore by its promoter Goswami Infratech. The net proceeds from the issue shall be utilized towards capital expenditure; funding long term working capital needs; prepayment of certain borrowings; and general corporate purpose.
Before its IPO Afcons Infra raised Rs 2,967 crore from a number of investors. The pre-IPO book included names like 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.
Afcons Infrastructure mopped up Rs 1,621.5 crore from 80 anchor investors as it allocated 3,50,21,597 shares at Rs 463 apiece. Anchor book included names like Monetary Authority of Singapore, Blackrock, PGGM World Equity, Fidelity, Goldman Sachs, Nomura, BNP Paribas, East Bridge Capital Master Fund, Brinker Capital, Societe Generale, Morgan Stanley and more.
Afcons Infra has 67 active projects across 13 countries, totaling an order book of Rs 34,888 crore as of September 30, 2023. The company is globally present in Asia, Africa and Middle East. The company has completed 76 projects across 15 countries with a total historic executed contract value of Rs 52,220 crore.
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Afcons Infrastructure reported a net profit of Rs 91.59 crore with a revenue of Rs 3,213.47 crore for the quarter ended on June 30, 2024. The company clocked a net profit of Rs 449.76 crore with a revenue of Rs 13,646.88 crore for the financial year ended on March 31, 2024. Shares of the company shall be listed on both BSE & NSE on Monday, November 4.
Afcon Infra has reserved shares worth Rs 25 crore for the eligible employees of the company, who will get a discount of Rs 44 per share. Of the balance issue, 50 per cent of the net offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) have 15 per cent of the allocation. Retail investors will get the remaining 35 per cent.
ICICI Securities, DAM Capital Advisors, Jefferies India, Nuvama Wealth Management, Nomura Financial Advisory and Securities (India) and SBI Capital Markets are the book running lead managers of the Afcons Infra IPO, while Link Intime India is the registrar for the issue. Here’s what a host of brokerage said about the IPO of Afcon Infrastructure:
KR Choksey Finserv
Rating: Subscribe
Afcons Infra is strategically positioned for sustained growth within the infrastructure sector, capitalizing on its extensive experience in executing complex engineering, procurement, and construction projects. Given its solid financials and proactive growth strategies, it is positioned for a favourable valuation. The IPO is pegged at a PE multiple of 36 times, said KR Choksey.
“Afcons has demonstrated exceptional financial performance, reporting significant revenue and maintaining a strong profit margin. In light of Afcons Infrastructure’s robust growth potential, solid financial performance and strategic initiatives aimed at market expansion, we recommend a ‘subscribe’ rating for the company,” it added.
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Chola Securities
Rating: Neutral
Afcons benefits from the parentage of the Shapoorji Pallonji Group, which has a legacy of over 150 years, with a strong global presence and extensive industry experience . The company has successfully completed the Ghana Rail Project in Ghana and the Chenab Bridge located in J&K, said Chola Securities.
“The IPO is reasonably priced with a post- issue PER of 37.86 times, compared to its peers, with a return on equity (ROE) of 13.3 per cent for FY24. We have issued a ‘neutral’ rating for Afcons Infrastructure IPO,” it said.
Marwadi Financial Services
Rating: Subscribe
Considering the June 24 EPS of Rs 12.25 on a post-issue basis, company is set to list at a P/E of 38 times with a market cap of Rs 17,026.18 crore whereas its peers, Larsen & Toubro, KEC International, Kalpataru Project International and Dilip Buildcon are trading at P/E ratios of approximately 37-67 times, said Marwadi Financial Services.
“We assign ‘subscribe’ rating to this IPO as the company has diversified order book across geographies, clients, and business verticals, longstanding relationships with clients globally. Also, it is available at reasonable valuation as compared to its peers,” it added.
Nirmal Bang Securities.
Rating: Neutral
Afcons Infra , despite its strong capabilities in managing large and complex projects, has exhibited a relatively modest revenue growth rate of 10 per cent CAGR from FY22 to FY24. In contrast, its larger peer, L&T, has achieved significantly faster growth during the same period further Afcons generates higher asset turns than its peers resulting in superior ROCE, said Nirmal Bang.
“Although Afcons has a decent order book to sales ratio of 2.4 per cent, the order book is executable over many years into the future. Afcons is currently offered at a 15 per cent premium over the average price-to-earnings (P/E) ratio of its peers. This premium appears unwarranted given its lower growth trajectory compared to competitors,” it added with a ‘neutral’ rating.
Canara Bank Securities
Rating: Subscribe
Afcons Infra has a strong, diversified business model with a solid order book and consistent financial performance in the infrastructure sector. Key strengths include strategic equipment investments, but challenges such as low PAT margins and reliance on government capex exist, said Canara Bank Securities.
“While management focuses on long-term asset utilization, backed by Shapoorji Pallonji, investors should be aware of risks related to capex dependency and profit margins. We recommend ‘subscribe’ to this issue for long-term gains,” it added.
Swastika Investmart
Rating: Subscribe for long term
Afcons Infra is a part of the well-established Shapoorji Pallonji Group. The company has accomplished numerous renowned infrastructure projects and it has a strong order book that supports future growth with stable financial performance over the years, said Swastika Investmart.
“The IPO is reasonably priced. Long-term prospects look promising, but listing performance may be impacted by current market conditions,” it added, recommending long-term investors willing to withstand potential listing volatility.
StoxBox
Rating: Subscribe
Owing to the company’s strong presence in the market, strong parentage, a wide array of solutions and a higher concentration of government projects, the company is well-positioned to benefit from the economic tailwinds. The company maintained a robust ROE of 12.5 per cent and an ROCE of 13.7 per cent in FY24, said StoxBox.
“The company is valued at a P/E ratio of 35.1 times on the upper price band based on FY24 earnings, which is lower than the average P/E of the industry. Given its strong position in the market, the company is poised to capitalize on emerging market opportunities,” it added with a ‘subscribe’ rating for the issue from a medium to long-term perspective.
Arihant Capital Markets
Rating: Subscribe
Afcons Infra focuses on delivering high-quality services in road and marine projects while leveraging its market position in new geographies. It brings attention to sustainability and profitability by managing a recurring order book of high-margin specialized projects, said Arihant Capital.
“The company is also dedicated to optimizing costs while also enhancing its project delivery capabilities and capacity. At the upper band of Rs 463, the issue is valued at a P/E ratio of 46.48 times, based on a FY24 EPS of Rs 9.96 times. We are recommending a ‘subscribe’ for this issue,” it added.
