Diffusion Engineers launched its initial public offering (IPO) on Thursday, September 26 and the issue is open for subscription until Monday, September 30. The company is offering its shares in the range of Rs 159-168 apiece, where investors can apply for a minimum of 88 equity shares and its multiples thereafter.
Incorporated in 1982, Nagpur-based Diffusion Engineers is active in the manufacture of welding consumables, wear plates and parts, and heavy machinery for core industries. The company offers specialized repair and reconditioning services for heavy machinery and equipment.
The Rs 158 crore IPO of Diffusion Engineers is entirely a fresh share sale of 94,05,000 equity shares. The net proceeds from the issue shall be utilized towards funding capital expenditure requirements towards the expansion of existing manufacturing facilities; setting up of a new manufacturing facility; funding working capital requirements; and general corporate purposes.
Ahead of its IPO, Diffusion Engineers raised Rs 47.15 crore from four anchor investors including HDFC Mutual Fund, 3P India Equity Fund I, Saint Capital Fund and Craft Emerging Market Fund PCC. It allocated 28,06,500 equity shares to four anchor investors for Rs 168 per equity share.
Diffusion Engineers also trades in wear protection powders and welding and cutting machines. At its production facilities, the company offers the super conditioning process, a surface treatment for machine components that increases wear resistance, eliminates stresses, and improves reparability, ultimately extending service life and reducing production costs.
Diffusion Engineers has four manufacturing units, of which Units I, II, and III are located at Nagpur Industrial Area, Hingna, Nagpur, Maharashtra, and Unit IV at Khapri (Uma), Nagpur, Maharashtra is responsible for the processing and manufacturing of the products.
For the year ended on March 31, 2024, the company reported a net profit of Rs 30.8 crore with a revenue of Rs 285.56 crore. The company's bottomline came in at Rs 22.15 crore with a revenue of Rs 258.67 crore in the year 2022-23. The company will command a total market capitalization of 628.76 crore.
The issue includes a reservation of up to 50,000 shares for eligible employees of the company, who shall be offered at a discount of Rs 8 apiece. The company has reserved 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 of the net offer.
Unistone Capital is the sole book running lead manager of the Diffusion Engineers IPO, while Bigshare Services is the registrar for the issue. Shares of the company shall be on both BSE and NSE with October 4, Friday, as the tentative date of listing on the bourses. Here's what analysts said about the IPO of Diffusion Engineers:
Swastika Investmart Rating: Subscribe with caution Diffusion Engineers operates in a promising sector with significant infrastructure and industrialization spending. The company's focus on forward integration and diversification positions it for future growth, said Swastika Investmart in its IPO note.
"It has demonstrated consistent financial growth and improving margins. The IPO's P/E valuation is considered fair. Investors may consider applying for the IPO, both for potential listing gains and long-term value appreciation," it said.
Anand Rathi Research Rating: Subscribe Diffusion Engineers is specialized in manufacturing welding consumables, wear plates and heavy machinery for core industries. It provides repair and reconditioning services for heavy equipment and trades in wear protection powders and welding machines. It plans to enhance its service delivery by robust growth and operational efficiency, said Anand Rathi Research.
"At the upper price band, the company is valuing at P/E of 20.4 times with a market cap of Rs 629 crore post issue of equity shares and return on net worth of 18.5 per cent. On the valuation front, we believe that the company is fairly priced. Thus, we recommend a 'subscribe' rating to the IPO," it said.
StoxBox Rating: Subscribe for long-term With a diverse customer base of OEMs and direct customers both domestically and internationally, Diffusion Engineers demonstrates its ability to meet specific needs of major players in sectors like cement, steel, and power. It is strategically planning to expand its manufacturing capacity to meet the growing demand for its products, said StoxBox in its IPO note.
"On the financial front, the company posted strong CAGR for operating income, profitability, and EBITDA between FY21-24. With the issue priced at a P/E of 11.7 times on the upper price band based on FY24 earnings, which is relatively lower compared to its peers, we recommend investors to subscribe to this issue from a medium to long-term investment perspective," it said.
Master Capital Service Rating: Subscribe for long term Diffusion Engineers plans to take advantage of this growth-fueled environment by focusing on a strategic expansion into nickel, cobalt, and iron-based powder manufacturing for an enhanced welding consumables portfolio. The company also intends to expand its geographical reach and increase its exports through its subsidiaries and joint ventures, said Master Capital Services.
The company is focusing on diversifying its Anti Wear Solutions and Heavy Engineering Equipment business into new industries and providing customized solutions for the same across various industries. Investors looking to invest can invest in the IPO for the medium to long term," it suggested.