Azad Engineering IPO Check grey market premium, other details: 80-Times Subscriptions!

Azad Engineering IPO Records Over 80-Fold Subscription: Unraveling Grey Market Premium and Other Intricacies

Investor sentiment in the grey market is notably optimistic about the Azad Engineering IPO.

The closure of the Rs 740-crore public offering by Telangana-based Azad Engineering on December 22 witnessed an exceptional level of subscription. Investors hurried to secure a stake in the company specializing in original equipment manufacturing for the energy, aerospace, defense, and oil & gas sectors.

Between December 20 and 22, the public offering achieved a staggering 80.6-fold subscription, drawing support from various investor categories. Foremost among them were qualified institutional buyers, seizing a substantial 179.66 times the allocated quota.

High net-worth individuals and retail investors exhibited significant interest, subscribing 87.55 and 23.71 times their respective portions. Meanwhile, employees showed enthusiasm with a 14.69-fold bid for their reserved portion.

All these participants are now eagerly awaiting the finalization of the IPO shares’ allotment basis by December 26. Subsequently, they can verify their share allotment status either on the BSE website or the IPO registrar’s portal through three straightforward steps.

On the BSE website
1) Opt for ‘equity’ under the issue type and ‘Azad Engineering Limited’ under the issue name.
2) Input either ‘Application number’ or ‘PAN number.’
3) Tick the box (I am not a robot) and click the ‘search’ button.

On the IPO registrar’s portal
1) Choose IPO in the dropdown for ‘Azad Engineering Limited.’
2) Select and accordingly input ‘Application number,’ ‘Demat account,’ or ‘PAN.’
3) Input the ‘captcha’ and click ‘submit.’

Successfully allotted investors will find the shares in their demat accounts by December 27. Trading in the equity shares is scheduled to commence on the bourses on December 28, following the T+3 timeline.

Grey market investors display considerable bullishness towards the IPO, as Azad shares reportedly commanded a 75 percent premium over the upper price band in this unofficial trading platform, analysts shared on condition of anonymity.

Robust subscription figures, resilient financials—despite volatility on the profit front—a diverse product portfolio, and anticipated growth in the aerospace and defense sectors are considered key factors contributing to the robust premium, according to experts.

The grey market functions as an informal avenue for trading IPO shares until their official listing.

The precision engineering firm, specializing in forged and machined components, has demonstrated robust financial growth, with revenue registering a CAGR of 43 percent and profit at 33 percent during FY21-23. The EBITDA margin surged to 33 percent in H1 FY24 from 22.9 percent in FY21, while the net debt-to-equity ratio is expected to drop to 0.1x post the IPO.

Motilal Oswal favors Azad due to its presence in a high-growth niche segment with formidable entry barriers, a varied product and client portfolio, and robust financials. “It stands to benefit from industry tailwinds, particularly in aerospace and defense, potentially improving its revenue mix,” the firm stated.

Although valuations are deemed somewhat high, Mehta Equities noted, “Given the niche product profile with demand for mission and life-critical components, along with 80 percent export revenue and a superior margin profile, it commands a higher valuation multiple.”

The Azad IPO comprised a mix of a fresh issue of Rs 240 crore and an offer-for-sale (OFS) of shares worth Rs 500 crore. The offer price ranged from Rs 499 to Rs 524 per share.

Proceeds from the fresh issue are earmarked for capital expenditure, debt repayment, and general corporate purposes, while the OFS funds will go to the selling shareholders.

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