Afcons Infrastructure Sets Stage for ₹5430 Cr IPO

Afcons Infrastructure Ltd., a key player in India’s infrastructure and construction space, is all set to launch its ₹5,430 crore IPO on October 25, 2024. The IPO is generating buzz in the market, particularly as it comes from the prestigious Shapoorji Pallonji Group, known for its massive contributions to India’s engineering and construction landscape. With its proven track record and robust portfolio of projects, Afcons Infrastructure’s upcoming IPO has caught the attention of retail and institutional investors alike. Here’s a detailed breakdown of the IPO details, financials, and the opportunities it presents.

Afcons Infrastructure IPO overview

The Afcons Infrastructure IPO is expected to raise ₹5,430 crore, which will include ₹1,250 crore from the fresh issue and ₹4,180 crore via an offer for sale (OFS). This provides investors a significant opportunity to tap into a company with a long-standing presence in India’s infrastructure sector.

Key details:

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Understanding Afcons Infrastructure

Founded in 1959, Afcons Infrastructure Ltd. is a flagship company of the Shapoorji Pallonji Group. The company operates across various infrastructure sectors, including marine, surface transport, urban infrastructure, hydro, underground projects, and oil and gas projects. With 65 active projects across 12 countries, Afcons has built a strong reputation for executing large-scale, complex projects. The company’s diverse portfolio gives it an edge in the competitive infrastructure market.

Major business verticals:

1. Marine and Industrial Projects: Ports, LNG tanks, jetties, and breakwaters.
2. Surface Transport: Highways, railways, mining infrastructure.
3. Urban Infrastructure: Metro projects, flyovers, bridges, and tunnels.
4. Hydro and Underground Projects: Dams, barrages, tunnels, and irrigation systems.
5. Oil and Gas: Offshore and onshore projects for the oil and gas industry.

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Afcons Infrastructure IPO price band and investment options

The price band for Afcons Infrastructure’s IPO is set between ₹440 and ₹463 per share. Retail investors can apply for a minimum of 32 shares, translating into an investment of ₹14,816 at the upper price band. For small non-institutional investors (NIIs), the minimum investment starts at ₹207,424, and for big NIIs, it reaches ₹1,007,488.

Share Allocation:

• 50% reserved for Qualified Institutional Buyers (QIBs).
• 35% for retail investors.
• 15% for Non-Institutional Investors (NIIs).

Use of IPO proceeds

The funds raised from the fresh issue will be used for the following:

1. ₹80 crore for capital expenditure, including purchasing construction equipment.
2. ₹320 crore to fund long-term working capital requirements.
3. ₹600 crore for the repayment of certain borrowings.
4. The remaining funds will be used for general corporate purposes.

The proceeds from the OFS will go to the selling shareholders, including Goswami Infratech Pvt Ltd, a promoter group company. Afcons will not receive any proceeds from the OFS.

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Financial Performance

Afcons Infrastructure has shown consistent growth, demonstrating its financial strength. For the fiscal year ending March 31, 2024, the company reported a 14.69% increase in revenue to ₹12,637.38 crore, with a 14.89% rise in net profit to ₹410.86 crore. The company also posted strong figures for the six months ending June 30, 2024, with ₹6,505.39 crore in revenue and ₹195.13 crore in net profit.

Financial Snapshot:

Opportunities and risks for investors

Afcons Infrastructure operates in a competitive and growing infrastructure market, with key competitors like Larsen & Toubro (L&T), KEC International, and Kalpataru Projects International Ltd. The company’s long-standing expertise in the infrastructure sector makes it an attractive investment opportunity.

Key Risks:

1. Project Dependency: Around 69.80% of the company’s order book comes from government contracts, exposing it to policy changes and project delays.
2. International Exposure: While a global presence is a strength, projects across Asia, Africa, and the Middle East increase exposure to geopolitical risks.
3. High Competition: The company faces stiff competition from well-established infrastructure giants, which can affect its ability to secure new contracts.

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Competitive strengths

Despite these risks, Afcons Infrastructure’s competitive strengths make it a compelling choice for investors:

• Strong Project Execution: Afcons has a solid track record of delivering complex projects on time, both in India and internationally.
• Diversified Portfolio: The company’s projects span multiple sectors, reducing dependency on a single vertical.
• Global Reach: Afcons has successfully completed projects in 17 countries, with a robust order book of ₹34,888 crore as of June 2024.

Should you invest in Afcons Infrastructure IPO?

For investors looking to tap into the rapidly growing infrastructure sector, Afcons Infrastructure’s IPO presents a significant opportunity. The company’s diverse portfolio, strong financial performance, and extensive track record make it a promising candidate for long-term growth. However, like any investment, it comes with risks, particularly due to its reliance on government projects and international exposure.

Make sure to consult with your financial advisor and thoroughly assess your risk tolerance before making a decision.