Azad Engineering IPO Success! :Final Day Epic Frenzy: 80.6x Subscriptions, HNIs Impress at 87.55x!

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Azad Engineering IPO Culmination: Subscriptions Soar at 80.6 Times, HNIs Impress with 87.55-Fold Bids

Azad Engineering IPO | The commencement of trading in equity shares on the bourses is slated for December 28.

The Azad Engineering IPO has garnered a robust response from a diverse spectrum of investors, registering an impressive 80.6-fold subscription. Participants fervently submitted bids for 81.58 crore equity shares, surpassing the offer size of 1.01 crore shares on the final day of bidding, December 22.

Qualified institutional buyers took the lead, acquiring 179.66 times the allotted quota, while high-net-worth individuals (non-institutional investors) and retail investors secured shares at 87.55 and 23.71 times the portions allocated to them, respectively.

Employees, with a reservation for Rs 4 crore worth of shares in the IPO, displayed notable enthusiasm, bidding 14.69 times the reserved portion.

The Telangana-based precision engineering firm specializing in forged and machined components aims to raise Rs 740 crore through its initial public offering at the upper price band.

The IPO comprises a fresh issuance of shares worth Rs 240 crore and an offer-for-sale (OFS) of shares worth Rs 500 crore.

Prominent entities such as Promoter Rakesh Chopdar, investor Piramal Structured Credit Opportunities Fund, and other selling shareholder DMI Finance are participants in the OFS. The offer, which opened on December 20, features a price band of Rs 499-524 per share.

Azad Engineering, servicing original equipment manufacturers (OEM) in the energy, aerospace, and defense, and oil and gas industries, plans to allocate net fresh issue proceeds for acquiring plant and machinery (Rs 60.4 crore), repaying debts (Rs 138.19 crore), and addressing general corporate needs.

The company is set to finalize the basis of the IPO share allotment by December 26, with equity shares expected to be credited to successful investors’ demat accounts by December 27. Trading in Azad Engineering on the bourses is scheduled to commence on December 28, adhering to the IPO schedule.

Azad shares generated considerable interest in the grey market, trading at a premium of 65-70 percent over the upper price band, as noted by analysts who preferred to remain anonymous. The grey market serves as an unofficial platform for trading IPO shares until their official listing.

The issue, priced at 57.6x 1HFY24 P/E (on an annualized & diluted basis), boasts a market capitalization of Rs 3,100 crore at the upper price band.

Motilal Oswal expresses favor for Azad, citing its presence in a high-growth niche segment with formidable entry barriers, a diversified product/client portfolio, and robust financials. The company stands to benefit from industry tailwinds, particularly in the aerospace and defense space, potentially enhancing its revenue mix.

Azad Engineering has demonstrated impressive growth, with revenue surging by 43 percent during FY21-FY23 and profits rising by 33 percent over the same period. The company boasts a healthy RoE (post-dilution) of 15 percent for 1HFY24, with net debt/equity expected to decrease to 0.1x post-repayment.

Mehta Equities acknowledges the issue’s relatively high valuation but aligns it with industry peers, noting that the niche product profile, coupled with demand for mission-critical components, 80 percent export revenue, and a superior margin profile, justifies the higher valuation multiple.

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