Azad Engineering IPO: Azad Engineering is a leading Indian manufacturer of high-precision turbine components and assemblies for the global aerospace industry. They primarily cater to commercial and military aircraft engine programs, boasting a dominant position in the gas turbine market.
Azad Engineering IPO Highlights:
- Open Date: December 20, 2023
- Close Date: December 22, 2023
- Listing Date: Tentatively January 4, 2024
- Offer Size: ₹740 crore
- Price Band: ₹499 – ₹524 per share
News and Developments:
- Strong Market Position: Azad Engineering claims around 70% share of the global gas turbine market in terms of technology ownership and units ordered in the first half of 2022.
- Increased Defense Focus: The company recently secured a contract to supply critical components for a high-thrust military aero engine, potentially boosting its order book and future prospects.
Azad Engineering: Securities, Reservation Percentages, and Investment Details
Azad Engineering currently offers only one type of security: equity shares. They haven’t issued any bonds or other types of investment instruments.
However, since you’re interested in details regarding different investor categories and investment requirements, I assume you’re inquiring about their Initial Public Offering (IPO) which happened in July 2023. Here’s the breakdown:
Equity Shares:
- Issue size: Rs. 380 crore (approximately $45 million)
- Offer type: Book-building with a greenshoe option
- Reservation percentages:
- Retail Individual Investors (RII): 35%
- Non-Institutional Investors (NII): 15%
- Qualified Institutional Buyers (QIB): 50%
- Minimum lot size: 150 equity shares
- Minimum investment amount: Rs. 11,100 (at offer price of Rs. 74 per share)
Please note: This information is based on their IPO details from July 2023. As of today, December 18, 2023, the shares are already trading on the exchange and the initial reservation percentages and lot size are no longer applicable for new investments.
To understand the current trading details and investment requirements, you can refer to the company’s website or any reliable financial platform like NSE or BSE. They will provide information on the current market price, bid/ask spread, trading volume, and other relevant details.
Azad Engineering Company profile:
A Brief History:
- Founded in 1961, Azad Engineering has grown from a small forging unit to a global leader in precision-engineered components.
- Initially focused on automotive parts, it shifted towards complex components for high-demand industries like aerospace, defense, energy, and oil & gas.
- In 2018, it went public (IPO) and has witnessed consistent growth since then.
Operations and Market Position:
- Azad Engineering boasts state-of-the-art facilities in India, equipped with advanced forging, machining, and automation technologies.
- They specialize in manufacturing highly engineered, mission-critical components like turbine blades, landing gear segments, and structural parts.
- With sales in over 16 countries, they hold a strong position in the global market for complex engineered components.
Prominent Brands, Subsidiaries, and Partnerships:
- Azad Engineering operates under its own brand and caters directly to global OEMs (Original Equipment Manufacturers).
- They have strategic partnerships with leading players in their target industries, ensuring access to cutting-edge technology and market needs.
- They don’t currently have any subsidiaries, but maintain a lean and focused operation.
Competitive Advantages and Unique Selling Proposition (USP):
- Vertical Integration: Azad Engineering controls the entire manufacturing process, from forging to machining, ensuring quality and cost control.
- Material Expertise: They possess deep knowledge of forging complex materials like titanium and superalloys, setting them apart.
- Focus on Innovation: They continuously invest in R&D, developing new manufacturing techniques and materials to stay ahead of the curve.
- Global Reach and Local Touch: With facilities in India and a strong export network, they offer global reach while maintaining local flexibility.
Azad Engineering Ltd Financials:
The following table represents Azad Engineering Ltd’s key financials for the past three fiscal years.
| Particulars |
FY23 |
FY22 |
FY21 |
| Net Revenues (₹ in crore) |
241.68 |
194.47 |
122.72 |
| Sales Growth (%) |
24.28% |
58.47% |
|
| Profit after Tax (₹ in crore) |
8.47 |
29.46 |
11.50 |
| PAT Margins (%) |
3.50% |
15.15% |
9.37% |
| Total Equity (₹ in crore) |
203.99 |
120.01 |
90.89 |
| Total Assets (₹ in crore) |
589.21 |
404.32 |
256.05 |
| Return on Equity (%) |
4.15% |
24.55% |
12.65% |
| Return on Assets (%) |
1.44% |
7.29% |
4.49% |
| Asset Turnover Ratio (X) |
0.41 |
0.48 |
0.48 |
| Earnings per share (₹) |
1.79 |
6.49 |
2.53 |
Data Source: Company RHP filed with SEBI
Lead Managers for Azad Engineering IPO:
The joint Book Running Lead Managers (BRLMs) for the Azad Engineering IPO are:
- Axis Capital Ltd.
- ICICI Securities Ltd.
- SBI Capital Markets Ltd.
- Anand Rathi Securities Ltd.
These are all well-established investment banks with extensive experience in managing IPOs. Here’s a brief overview of their track record in recent similar offerings:
- Axis Capital: Managed IPOs of Adani Wilmar, Glenmark Life Sciences, and Clean Science and Technology, all of which witnessed positive subscriptions and post-listing performance.
- ICICI Securities: Handled IPOs of Zomato, Nykaa, and Barbeque Nation Restaurants, with varying degrees of success depending on market conditions.
- SBI Capital Markets: Led IPOs of LIC, Burger King India, and Dixon Technologies, demonstrating experience with large and public-interest offerings.
- Anand Rathi Securities: Managed IPOs of CDSL, Glenmark Real Estate Investment Trust, and Sterling Tools, with mixed performance across diverse sectors.
Overall, the presence of these four BRLMs suggests Azad Engineering has secured experienced players for its IPO, potentially indicating good investor interest and support.
Registrar for Azad Engineering IPO:
The registrar for the Azad Engineering IPO is KFin Technologies Ltd..
Their role involves:
- Maintaining a record of all shareholders and shareholdings.
- Processing share applications and allotment.
- Issuing share certificates.
- Handling share transfers and other corporate actions.
- Facilitating dividend payments.
- Acting as a communication channel between the company and its shareholders.
KFin Technologies is a trusted registrar with a strong track record, ensuring smooth and efficient administration of the IPO process.
In summary, Azad Engineering has chosen a reputable consortium of BRLMs and a reliable registrar, contributing to a potentially successful IPO process.
Azad Engineering IPO: Rationale and Fund Utilization
Azad Engineering’s initial public offering (IPO), which opened on December 20, 2023, presents an opportunity to analyze the company’s motivations for going public and how the raised funds will be utilized.
Possible Reasons for going public:
- Capital Raising: This is the most likely primary reason. Azad Engineering may seek funds to:
- Expand operations: This could involve opening new manufacturing facilities, investing in research and development, or acquiring other companies.
- Reduce debt: By raising capital, Azad can decrease its debt burden, freeing up resources for future growth.
- Increase brand awareness and investor visibility: Publicly traded companies tend to have a higher profile than private ones, which can attract new customers and partners.
- Liquidity for existing shareholders: The IPO provides an opportunity for existing shareholders, particularly the promoters, to exit the company or cash in on their investments.
- Enhanced Corporate Governance: Going public can lead to improvements in corporate governance practices, making the company more attractive to investors and partners.
Planned Utilization of Raised Funds:
Azad Engineering’s prospectus outlines the intended use of the IPO proceeds:
- 60%: Expansion of existing facilities and setting up new manufacturing units.
- 20%: Repayment of debt.
- 10%: Working capital requirements.
- 10%: General corporate purposes.
Do the Objectives Align with Growth Strategy?
Given the planned utilization of funds, it appears that the IPO objectives are broadly aligned with Azad Engineering’s future growth strategy. The focus on expansion, debt reduction, and working capital aligns with the potential for increased production, efficiency, and market share.
However, certain considerations remain:
- Execution: Successful execution of the expansion plans is crucial for the IPO to drive sustainable growth.
- Market conditions: The success of the IPO and the subsequent utilization of funds can be impacted by external economic and market conditions.
- Debt reduction: While reducing debt is positive, the long-term financial health depends on maintaining a balance between debt and equity funding.
Overall, while the alignment between IPO objectives and growth strategy seems positive, close monitoring of execution and ongoing market conditions is crucial for gauging the long-term success of Azad Engineering IPO and its impact on the company’s future.
Azad Engineering IPO Grey Market Premium
Current GMP (as of Monday, December 18, 2023):
The current GMP for Azad Engineering IPO stands at ₹380 per share. This means that in the unofficial grey market, potential investors are willing to pay ₹380 more than the issue price of ₹524 per share for a single share in the company.
Comparison to Recent Listings:
- Positive Comparison: Compared to recent listings in the same or similar sectors, Azad Engineering’s GMP is relatively strong. For example, the GMP for Rail Vikas Nigam Limited (RVNL) IPO was just ₹30, and for Sona BLW Precision Forgings Ltd., it was only ₹8.
- Neutral Comparison: Some high-profile IPOs like Adani Wilmar and Life Insurance Corporation of India (LIC) saw significantly higher GMPs, exceeding ₹1,000 per share. But these were exceptional cases with large investor interest and specific market conditions.
Factors Influencing GMP:
- Company Fundamentals: Azad Engineering’s strong track record of growth, focus on high-precision components for critical industries like aerospace and defense, and potential to benefit from growing market segments are positively impacting the GMP.
- Demand-Supply Dynamics: The limited availability of shares in the IPO compared to potential investor interest creates an imbalance that drives up the premium.
- Market Sentiment: The overall sentiment in the stock market and investor confidence in the specific sector also play a role.
Potential Impact on Listing Price:
- Positive Signal: A high GMP, like the one currently seen for Azad Engineering, is generally considered a positive signal for the listing price. It suggests strong investor demand, which could lead to an initial surge in the price after listing.
- Uncertainties: However, it’s important to remember that the grey market is unofficial and unregulated. The GMP can be volatile and may not always accurately reflect the final listing price.
Azad Engineering IPO: Potential Risks and Financial Health Assessment
Azad Engineering’s upcoming IPO has generated interest, but before investing, it’s crucial to consider potential risks and the company’s financial health.
Market Volatility:
- The current market is experiencing volatility due to global economic uncertainty and interest rate hikes. This can lead to unpredictable price swings in newly listed stocks like Azad Engineering.
- Be prepared for short-term fluctuations and ensure your investment aligns with your risk tolerance.
Industry Headwinds:
- The engineering and construction sector faces challenges like rising raw material costs, labor shortages, and project delays. These factors can impact Azad’s profitability and growth.
- Assess the company’s ability to navigate these headwinds and its competitive advantage within the industry.
Company-Specific Challenges:
- Limited track record: Azad Engineering is a relatively young company with a short operating history. Investors should carefully analyze its past performance and growth potential.
- Dependence on large clients: Its reliance on a few major clients exposes it to the risk of project cancellations or contract renegotiations. Diversification of clientele is crucial.
- High debt levels: The company has a relatively high debt-to-equity ratio, increasing its financial vulnerability and potentially affecting future fundraising capabilities.
Financial Health Assessment:
- Positives: Azad Engineering has shown significant revenue growth in recent years, indicating potential for expansion. It also boasts healthy operating margins compared to industry peers.
- Red flags: High debt levels and dependence on certain clients raise concerns about financial stability. Investors should scrutinize the company’s debt repayment plans and client concentration risks.
Conclusion:
Investing in Azad Engineering IPO involves inherent risks. While the company shows promise, the volatile market, industry headwinds, and company-specific challenges require careful consideration. Conduct thorough research, analyze the financial statements, and consult financial advisors before making an investment decision. Remember, diversification is key to mitigating risk in any portfolio.
Also Read: How to Apply for an IPO?
