The initial public offering (IPO) of Afcons Infrastructure saw a muted response from the investors during the second day of the bidding process. The issue, which kicked-off for bidding on Friday, October 25, was initially off to a muted start and was booked 10 per cent on day one.
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 8,66,19,950 equity shares, or 25 per cent, compared to the 2,20,20,256 equity shares offered for the subscription by 3.00 pm on Monday, October 28. The three-day bidding for the issue will conclude on Tuesday, October 29.
The allocation for retail investors was subscribed 32 per cent, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 38 per cent. The allocation for employees was booked 0.91 per cent. However, the quota set aside for qualified institutional bidders (QIBs) quota saw bids only 3 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 75 earlier.
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.
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.
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. With a diverse portfolio spanning marine, transportation, bridges and urban infrastructure, Afcons ability to complete projects ahead of schedule highlights its operational excellence, said Mehta Equities.
"Given the company’s advanced equipment base and proven execution capabilities and strategic market position make them a key player in infrastructure sectors. Hence, by looking at all attributes we recommend investors to 'subscribe' the Afcons Infrastructure Ltd for long term perspective only," it said.
Afcons 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 Infra is trading at a P/E ratio of 38 times for FY24, which is in line with its peers. With the government’s initiatives aimed at infrastructure development, including increased budgetary allocations and the rapid pace of urbanization, AIL is strategically positioned for substantial growth, said Geojit Financial Services.
"Considering its extensive experience in completing high-value and complex projects that offer better margins. Geographical diversification with operations across multiple sectors broadens their revenue base and mitigates risks. With a robust order book and a successful track record of project completion, we assign a 'subscribe' rating for medium- to long-term investment," it said.
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.