Is Afcons Infrastructure IPO Good or Bad - Detailed Review
24 October 2024
8 min read
00:00 / 00:00
Afcons Infrastructure Limited is kicking off its initial public offering which will be open from October 25, 2024, to October 29, 2024. While considering applying for this IPO, certain questions may arise, including whether Afcons Infrastructure IPO is good or bad, whether it is worth investing in this IPO, and so on.
This article provides a comprehensive Afcons Infrastructure IPO review, diving into its business operations and fundamental analysis to help you make a well-informed investment decision.
Afcons Infrastructure IPO - Company Overview
Afcons Infrastructure Limited is a part of the Shapoorji Pallonji group, incorporated in 1959, The company is engaged in the business of infrastructure, engineering, and construction with projects executed both within India and Internationally.
The company’s projects cover five major infrastructure business verticals:
Marine and Industrial, covering ports and harbor jetties, dry docks, wet basins, breakwaters, outfall and intake structures, liquefied natural gas tanks, and material handling systems.
Surface Transport, covering highways and roads, interchanges, mining-related infrastructure, and railways.
Urban Infrastructure, covering elevated and underground metro works, bridges, flyovers, and elevated corridors.
Hydro and Underground, covering dams and barrages, tunnels (including large road tunnels) and underground works, water and irrigation.
Oil and Gas, covering both offshore and onshore oil and gas projects.
As stated in the Fitch Report, the company was India’s largest international infrastructure company as per the 2023 ENR (Engineering News-Record, US) Top International Contractors rankings, based on International Revenue for FY23.
In the last 11 financial years and the three months ended June 30, 2024, the company has completed 79 projects across 17 countries with a total historic executed contract value of Rs. 56,305 crores. As of June 30, 2024, the company has 65 active projects across 12 countries, aggregating to an order book of Rs.31,747 crores.
The company has undertaken many ‘first of its kind’ infrastructure projects in India and the rest of the world and expanded its presence over the years across Asia, Africa, and the Middle East.
Afcons Infrastructure IPO - Financial Overview
The following image shows you the key financial details of Afcons Infrastructure for three financial years:
Source: RHP of the company
Through the financials of Afcons Infrastructure, we can see that the company majorly generates its revenue from its domestic operations contributing up to 75% of the revenue in FY24.
In the last three financial years, the company has increased its earnings from Rs.11,269.54 crores in FY22 to 13,646.87 in FY24. Similarly, its profits have also increased from Rs.357.60 crores to Rs.449.73 crores during the same period.
To accommodate the increasing revenues and profits, the company is maintaining a consistent order book of Rs. 31,747.42 crores as of Q1FY25. Furthermore, the company has been maintaining its book-to-bill ratio above 2 in the previous three financial years. This indicates that Afon has sufficient orders in the pipeline and is well-positioned to generate sufficient revenues for the future.
During FY24, the company generated an ROE of 13.28% which is slightly below the average returns. This can be attributed to the industry’s capital-intensive nature and Increasing assets in the company’s balance sheet which are leading to increasing depreciation expenses. The company has generated an ROCE of 20.18% during the same during which suggests that the company is efficiently using its overall resources.
As of FY24, the company has reported a debt-to-equity ratio of 0.91. Despite the company operating in a capital-intensive industry. This means that the company is operating majorly using its own capital.
Afcons Infrastructure IPO - Industry Overview
As per the Fitch report, the construction industry globally stood at approximately US 5.7 trillion as of 2023 and is expected to grow further to US 7.8 trillion by 2029. This growth will be mainly driven by expanding investment in construction in emerging markets.
Among these, India is expected to remain the fastest-growing economy with a growth rate projected at 6.8% for FY26-27. As of FY23, the construction industry in India stood at a value of Rs.23,97,800 crores. It is also projected to be the fastest-growing construction market in the world, growing at a CAGR of 9.5-10% between FY23 and FY28 to reach a market size of Rs.38,50,890 crores.
Afcons Infrastructure IPO - Peer Comparison
The listed peers of Afcons Infrastructure Limited are Larsen & Toubro Limited, KEC International Limited, Kalpataru Project International Limited, and Dilip Buildcon Limited. Below is the image showing a comparison of Dilip Buildcon Limited with its listed industry peers as of FY24:
Particulars | Company (Rs Crores) | L&T (Standalone) (Rs Crores) | KEC (Rs Crores) | KPIL (Rs Crores) | DBL (Rs Crores) |
Order Book | 30,960.99 | 3,71,381.00 | 29,644.00 | 58,415.00 | 17,431.60 |
Domestic Order Book | 22,401.59 | 2,85,963.37 | 22,233.00 | 32,128.25 | 17,431.60 |
Domestic Order Book (%) | 72.35% | 77.00% | 75.00% | 55.00% | 100.00% |
Overseas Order Book | 8,559.39 | 85,417.63 | 7,411.00 | 26,286.75 | 0 |
Overseas Order Book (%) | 27.65% | 23.00% | 25.00% | 45.00% | 0.00% |
Book to Bill Ratio (x) | 2.33 | 2.94 | 1.49 | 2.98 | 1.45 |
Order Inflow | 7,783.64 | 1,71,663.00 | 18,102.00 | 30,022.00 | 3,602.20 |
Revenue from Operations | 13,267.49 | 1,26,235.85 | 19,914.17 | 19,626.43 | 12,011.90 |
% Revenue from Overseas Projects | 24.89% | 21.00% | 36.24% | 37.81% | 0.00% |
Total Income | 13,646.87 | 1,31,576.45 | 19,966.58 | 19,690.42 | 12,156.11 |
EBITDA | 1,583.12 | 15,015.82 | 1,261.82 | 1,665.67 | 1,336.57 |
EBITDA Margin (%) | 11.60% | 11.41% | 6.32% | 8.46% | 11.00% |
Profit after Tax (PAT) | 449.74 | 9,304.33 | 346.78 | 515.9 | 201.04 |
PAT Margin (%) | 3.30% | 7.07% | 1.74% | 2.62% | 1.65% |
Cash Profit Margin (%) | 6.92% | 8.40% | 2.67% | 3.02% | 4.77% |
Total Equity | 3,595.96 | 64,416.04 | 4,095.70 | 5,137.99 | 4,369.65 |
Total Debt | 2,455.00 | 22,540.47 | 3,812.32 | 3,909.20 | 7,240.35 |
Net Debt | 1,788.74 | 17,771.28 | 3,539.04 | 2,877.21 | 6,503.87 |
Net Debt to EBITDA (x) | 1.13 | 1.18 | 2.8 | 1.73 | 4.87 |
Total Debt to Equity (x) | 0.68 | 0.35 | 0.93 | 0.76 | 1.66 |
Return on Equity (ROE) (%) | 13.28% | 13.69% | 8.82% | 10.47% | 4.80% |
Return on Capital Employed (ROCE) (%) | 20.18% | 15.02% | 14.47% | 13.67% | 8.60% |
Net Cash Flow from Operations (CFO) | 707.45 | 8,293.55 | 311.14 | 842.96 | 1,070.40 |
CFO/EBITDA (%) | 44.69% | 55.23% | 24.66% | 50.61% | 80.09% |
Net Working Capital (days) | 63 | 91 | 90 | 92 | 110 |
Gross Block | 5,391.39 | 17,917.27 | 2,195.24 | 3,356.83 | 4,167.87 |
Gross Block/Revenue from Operations (%) | 40.64% | 14.19% | 11.02% | 17.10% | 34.70% |
Despite being the second smallest in terms of revenue among its peers, Afcons Infrastructure stands out with strong financial metrics. As of FY24, the company recorded the second-highest PAT margin at 3.30%, just behind L&T, reflecting its solid operational efficiency. This indicates that Afcons is effectively converting its revenue into profit, showcasing its ability to manage costs well. Its return on equity (ROE) is also close to that of L&T, further highlighting its capacity to generate profits relative to shareholders' equity.
Additionally, Afcons leads in return on capital employed (ROCE), demonstrating the highest efficiency in utilizing its resources among its peers. This suggests that the company is making the most of its capital investments. Moreover, with the second-lowest debt-to-equity ratio, Afcons has relatively lower financial obligations, reflecting its prudent management of debt. This positions the company well in terms of financial stability and growth potential, as it operates with less burden from leverage compared to its peers.
Objectives Afcons Infrastructure IPO
The net proceeds from the fresh issue of Afcons Infrastructure IPO shall be used by the company for the following purposes:
S. No. | Particulars | Estimated Amount (Rs. Crores) |
1 | Capital expenditure toward the purchase of construction equipment | 80.0 |
2 | Funding long-term working capital requirements | 320.0 |
3 | Prepayment or scheduled repayment of a portion of certain outstanding borrowings and acceptances availed by our Company | 600.0 |
4 | General corporate purposes | NA |
Afcons Infrastructure IPO Details
Afcons Infrastructure IPO Date
The IPO is open to subscription from October 25, 2024, to October 29, 2024. The shares will be allotted to investors on October 30, 2024, and the company will be listed in the NSE and BSE on November 04, 2024.
Afcons Infrastructure IPO Issue Price
Afcons Infrastructure is offering its shares in the price band of Rs.440 to Rs.463 apiece. This means you would require an investment of Rs.14,816 per lot (32 shares) if you are bidding for the IPO at the upper price band.
Afcons Infrastructure IPO Size
The company is offering a total of 117,278,618 shares, amounting to Rs. 5,430 Crores. Out of these, 26,997,840 shares worth Rs. 1,250 Crores are offered through a fresh issue, and 90,280,778 shares worth Rs.4,180 Crores are offered through an offer for sale.
Afcons Infrastructure IPO GMP
Many investors look at the Grey Market Premium (GMP) before applying for the Afcons Infrastructure. The GMP gives an idea of market sentiment and can hint at the possible listing price. However, it should be noted that it does not reflect how financially strong the company is. Thus, it is important to financially analyze the stock before investing in it.
Afcons Infrastructure IPO Allotment Status
The shares will be allotted to its investors on October 30, 2024. One can check the allotment status for the Afcons Infrastructure IPO from its registrar Link Intime India Private Limited, the BSE website, or your broking platform where you have applied for the IPO.
Afcons Infrastructure IPO Application Link
Open a demat account with Rupeezy today and enjoy a seamless experience when applying for the IPO. With an easy-to-use platform, Rupeezy makes the IPO application process quick and hassle-free. Click on the apply link below to get started.
Apply for Afcons Infrastructure IPO
Is Afcons Infrastructure IPO a Good or Bad Investment? Final Thoughts
The IPO appears attractive given its strong financial performance, industry-leading ROCE of 20.18%, healthy order book of Rs.31,747 crores, and conservative debt position. The company has a proven track record of growth and is also well-positioned compared to its peers.
However, while their financials and growth potential look promising, investors should conduct thorough research and carefully consider their risk tolerance before investing, as IPOs can be volatile and infrastructure projects often face execution and regulatory challenges.
For those interested in investing in such IPOs, you can open a demat account with Rupeezy. Our trading platform allows you to participate in various investment opportunities including initial public offerings.
