Everything About the Afcons Infrastructure IPO

The Indian IPO (Initial Public Offering) market remains abuzz ahead of the Deepawali festival, with several promising companies looking to get listed on the bourses. One such company - Afcons Infrastructure Limited - plans to raise up to Rs. 5,430 crores through its IPO comprising both an offer for sale and a fresh issue.

With the money raised, the engineering and construction company intends to purchase new equipment, fund long-term working capital requirements, and prepay a portion of its outstanding borrowings. Keep reading to know more details about the Afcons IPO and determine whether you should invest in it.

About Afcons Infrastructure Limited
Founded in 1961, Afcons Infrastructure Limited is a well-established infrastructure, engineering, and construction company belonging to the prestigious Shapoorji Pallonji Group. The company operates across five major business verticals - marine and industrial, surface transport, hydro and underground, surface transport, and oil and gas projects.

As of 30 June 2024, Afcons Infrastructure Limited had already completed 70 projects spanning 17 countries, with an executed contract value of Rs. 56,305 crores. Across nearly six decades of operations, the company has expanded its footprint globally across continents, particularly in Asia, Africa, and the Middle East.

Strengths:

Below are a few strengths of the company as per the Draft Red Herring Prospectus (DRHP):

Boasts an excellent track record of timely completion of complex, large-scale, and high-value projects.

Diversified client base across geographies. As of 30 June 2024, the company had 65 active projects in 12 countries.

Experienced leadership group under the guidance of Shapoorji Pallonji Group.

The company has some well-known projects under its belt, including the Atal Tunnel, Delhi Metro Phase IV, and the Delhi-Meerut rapid transit system, among others.

The company's financials have improved significantly over the years

Claims to have an extensive fleet of equipment worth more than 490 million dollars

MIKE Award winner for project management excellence

Risks:

A few risks or weaknesses associated with Afcons Infrastructure Limited include:

A large portion of the revenue comes from government contracts. Changes in government or policies might impact the company's business.

Delay in receiving payments might affect the company's working capital.

Top 10 clients contribute more than 60% in revenues. Adverse relationships with these clients may hamper the company's business.

The company's promoters and directors are involved in certain outgoing legal proceedings.

The company's debt, as of 30 June 2024, stood at Rs. 17,732.36 crores

Financials:
Understanding the issuing company's financials is essential for IPO investment and derivative trading. A company with robust financials possess high profit potential, and is, therefore, a good option for investment. The table below depicts the consolidated financials of Afcons Infrastructure Limited for the last three financial years:

As you can see, the company's financials have grown robustly, with the revenue from operations increasing from Rs. 1,12,695.49 lakhs in FY22 to Rs. 1,36,468.74 lakhs in FY24. However, the company's outstandings have also increased exponentially which may worry a few investors.

IPO Details
Afcons Infrastructure IPO comprises a fresh issue of approximately 2.7 crore equity shares worth Rs. 1,250 crores and an offer for sale of up to 9.03 shares worth Rs. 4,180 crores. As a retail investor, you can apply for at least 32 shares (and in multiples thereof) within the price band of Rs. 440 to Rs. 463 per share. The minimum investment required is Rs. 14,080.

The table below captures the IPO timeline:

The Final Verdict
Given the company's robust financials and the projected growth of the construction industry in India, investing in Afcons Infrastructure IPO can be a great idea. However, as an investor, you must consider your risk appetite, financial goals, and the prevailing market conditions before making investment decisions.

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