The initial public offering (IPO) of Afcons Infrastructure managed to sail through with full subscription during the third and final day of the bidding process, thanks to QIB and NII push. The issue was booked 10 per cent on day one and ended day two with little more than one-third subscription.
Afcons Infra is selling its shares in the price band of Rs 440-463 apiece. Investors can apply for a minimum of 32 shares and its multiples thereafter. It is looking to raise Rs 5,430 crore via IPO, which includes a fresh share sale of 1,250 crore and offer-for-sale (OFS) of up to Rs 4,180 crore.
According to the data from BSE, the investors made bids for 18,06,00,960 equity shares, or 2.09 per cent, compared to the 8,66,19,950 equity shares offered for the subscription by 3.10 pm on Tuesday, October 29. The three-day bidding for the issue, which opened on Friday, October 25, concludes today.
The allocation for non-institutional investors (NIIs) was subscribed 4.17 times , while the portion reserved for qualified institutional bidders (QIBs) saw a subscription of 2.94 times. The allocation for employees was booked 1.56 times per cent. However, the quota set aside for retail investors saw bids only 71 per cent for their allocations as of the same time.
Mumbai-based 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 grey market premium (GMP) for Afcons Infrastructure has been falling consistently amid the volatile market sentiments. Last heard, the company was commanding a premium of Rs 25-30 in the unofficial market, suggesting a listing pop of merely 5-6 per cent for the investors. The GMP stood at Rs 40 a day ago.
Brokerages mostly have a positive view on the issue and suggest subscribing for a long term citing its sound financial record, extensive order book in India and across the globe and experience management. However, fully priced valuations and capital intensive nature of business are major concerns.
The growth in Afcons' order book with selected large value complex projects has contributed to its strong financial performance. Afcons Infrastructure Ltd. demonstrated a robust financial performance in Q1FY25 despite a decrease in the order book. As of June 30, 2024, Afcons has 65 ongoing projects across 12 countries, aggregating to an order book of Rs 31,747 crore, said SMIFS.
"The order book to bill ratio remains healthy at 2.52 times, indicating a strong pipeline of projects. We recommend to subscribe to the issue as a good long-term investment given the unique number of projects the company has undertaken coupled with a strong order book and reasonable valuations," it added.
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. Afcons 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. It 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.
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.
Afcons Infrastructure, is a leading Indian firm in international contracts, especially in marine, port, and bridge construction. It boasts over 6 decades of experience in infrastructure, engineering, and construction. It is recognized for executing complex EPC projects in India and internationally, with presence across 17 countries, said GEPL Capital.
"Despite capital-intensive operations and high depreciation impacting profit margins, the company reported healthy financial growth from FY22 to FY24, with revenue, EBITDA, and PAT increasing at CAGRs of 9.7 per cent, 20.8 per cent, and 12.1 per cent, respectively. Hence, we recommend a 'subscribe' rating for the issue," it said.
ICICI Securities, Jefferies India, DAM Capital Advisors, 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.