Afcons Infrastructure IPO Update: Subscription Lagging at 18% on Day 2

A Closer Look at Afcons Infrastructure IPO Performance

As we dive into the latest updates on the Afcons Infrastructure IPO, it’s important to highlight that, as of Day 2 of the bidding process, the subscription has only reached 18%. This is a significant lag compared to expectations. The GMP (Grey Market Premium) has also seen a dip, currently sitting at 4%. Let’s break down the details of this initial public offering and what it means for potential investors.

Current Subscription Status and Insights

By around 11 a.m. today, bids for 1,52,34,848 shares had been received, out of a total issue size of 8,66,19,950 shares. The breakdown shows that the retail portion is performing slightly better at 25%, while qualified institutional buyers (QIBs) have only managed to bid for 2,50,944 shares, against the 2,45,68,181 shares allocated to them. The non-institutional investor segment is lagging at just 22%.

Market analysts are keeping a close eye on the GMP of Afcons Infrastructure, which is currently at Rs 20, translating to a 4% premium over the issue price. This number indicates some market interest, albeit tempered by overall subscription rates.

IPO Details and Investment Strategy

The Afcons Infrastructure IPO is set to close on October 29. It consists of a fresh issue of shares worth Rs 1,250 crore and an offer for sale (OFS) of up to Rs 4,180 crore by Goswami Infratech, a promoter.

Here’s how the proceeds from the fresh issue will be allocated:

• Rs 80 crore for construction equipment purchases
• Rs 320 crore for long-term working capital
• Rs 600 crore for debt repayment
• The remaining amount will be used for general corporate purposes.

Price Band and Investment Advice

The company has established a price band of Rs 440-463 per share, allowing investors to bid in lots of 32 shares. Analysts are generally recommending that investors consider a long-term investment strategy despite current subscription challenges. They emphasize that Afcons boasts a strong and diversified business model supported by a solid order book and consistent financial performance.

Analyst Perspectives

According to Canara Bank Securities, the company has strengths that include strategic investments in equipment. However, they also caution potential investors about the low profit after tax (PAT) margins and reliance on government spending for projects. They suggest that while the management is focused on optimizing long-term asset utilization, investors should remain aware of the risks tied to capital expenditure dependencies and profitability issues.

Swastika Investmart echoed these sentiments, praising Afcons’ proven track record in completing numerous complex infrastructure projects. The firm has been recognized as a leading international infrastructure player, according to the 2023 rankings by Engineering News-Record (ENR).

The Bigger Picture: Afcons’ Business Model

Afcons operates across five major infrastructure verticals, which include:

1. Marine and Industrial
2. Surface Transport
3. Urban Infrastructure
4. Hydro and Underground
5. Oil and Gas

Founded in 1865, Shapoorji Pallonji Group (SP Group), which backs Afcons, has established a significant presence in various sectors, including engineering, construction, real estate, and energy.

Financial Performance Overview

For the fiscal year ending March 2024, Afcons reported a slight dip in revenue from operations, totaling Rs 3,154 crore, while the profit after tax rose to Rs 91.6 crore, an increase from Rs 90.9 crore the previous year. This mixed financial performance may contribute to current investor hesitancy.

Closing Thoughts: Should You Invest?

In conclusion, while the Afcons Infrastructure IPO is experiencing slow subscription rates, analysts maintain a cautious optimism. The company’s solid foundations and long-term growth potential suggest that it may still be a worthy investment for those willing to hold for the long haul.

For those looking to participate, it’s essential to weigh the current market dynamics and the inherent risks associated with government-related infrastructure projects. If you’re considering investing in Afcons Infrastructure, staying informed about the latest updates and expert analyses will be crucial.

Stay tuned for further developments as the subscription period draws to a close. Make sure to assess all factors carefully and consult financial advisors to align your investment strategy with your long-term goals.