Is Diffusion Engineers IPO Good or Bad - Detailed Review

Diffusion Engineers is kicking off its initial public offering which will be open from September 26, 2024 to September 30, 2024. While considering applying for this IPO, certain questions may arise in your mind, including whether Diffusion Engineers IPO is good or bad, whether it is worth investing in this IPO, and so on. 

This article provides a comprehensive Diffusion Engineers IPO review, diving into its business operations and fundamental analysis to help you make a well-informed investment decision.

Diffusion Engineers IPO - Company Overview

Diffusion Engineers was incorporated in 1982. It initially started trading in welding electrodes for super-conditioning. Currently, the company is engaged in the business of manufacturing welding consumables, wear plates, wear parts, and heavy engineering machinery for core industries. With over four decades of expertise, the company is committed to providing specialized repair and reconditioning services for heavy machinery and equipment. Furthermore, the company is involved in the trading of anti-wear powders and welding and cutting machinery.

The company also provides a super conditioning process at its manufacturing facilities, a surface treatment solution for machine components that enhances wear resistance, eliminates stress, and improves their repairability ultimately extending their lifespan and reducing production costs

Notably, the company has also developed a synergistic system of forward integration wherein, it manufactures special-purpose electrodes and flux-cored wires which are utilized for manufacturing wear resistance plates (wear plates). These wear plates then become an important part of the majority of large industrial equipment made in its heavy engineering division. The industrial equipment is used in core industries like cement, steel, power, mining, engineering, oil & gas, sugar, etc.

Currently, the company operates through its four manufacturing units located in Nagpur, Maharashtra, and Khapri. Furthermore. The company plans to expand its portfolio of welding consumables by manufacturing powders for corrosion and abrasion resistance to be used in welding applications into its product line.

Diffusion Engineers IPO- Revenue Base

The following tables give you the details of the Diffusion Engineers' domestic and export sales for the last three financial years.

While the company has its products in the international market including Asia, APEC, Africa, Middle East, Europe, and US regions, you can note from the above that, the sales are mainly dispersed in the Indian markets.

Here’s a table that will give you the segment wise break down of the company for the last three financial years:

From the table, it is evident that the company's sales of wielding and anti-wear consumables declined in FY24. However, the overall revenue of the company increased due to a rise in revenue from other segments, resulting in a more balanced portfolio.

The sales from the above segments were made in the following industries, and the table listing these industries with their respective sales is provided below:

Diffusion Engineers IPO - Financial Overview

The following table shows you the key financial details of Diffusion Engineers IPO for three financial years:

If we take a look at the financials of Diffusion Engineers, we can see that the company has consistently increased its revenue, from Rs.204.59 cr in FY22 to Rs.278.14 cr in FY24. 

Similarly, its profits have also steadily increased from Rs.17.05 cr in FY22 to Rs.30.80 cr in FY24 retaining a profit margin of 10.79%.

For FY24, the ROE and RoCE were reported at 18.52% and 20.63%, respectively. This suggests that the company has given good returns to the shareholder's capital and has efficiently utilized its overall resources. 

As of FY24, the company’s debt-to-equity ratio ratio stood at 0.18 which suggests that the company has low debt compared to its equity on its balance sheet. Furthermore, the company has recorded an interest coverage ratio of 26.99 during the recent financial year indicating the company’s ability to cover its debt obligations 26 times.

Diffusion Engineers IPO - Industry Overview 

The Indian welding consumable market stood at around Rs. 51 billion in FY24 and is expected to reach around Rs. 64-66 billion. This is majorly driven by the increasing demand for improved infrastructural development such as the construction of roads, bridges, ports, and airports.

Wear plates play an important role in industries such as power plants, steel mills, quarrying, cement, and so on. As industrialization accelerates in India, these sectors are expected to expand, further increasing the demand for wear plates to ensure the longevity of their equipment. Currently, the wear plates market in India is estimated at around Rs 22 billion in FY24 and is expected to grow at a CAGR of 8-9% to  Rs 28 billion in FY27. 

Furthermore, Heavy electrical engineering, earthmoving, construction and mining machinery, and process plant equipment are the largest segments within this industry. As of FY24, the heavy engineering capital goods industry in India is estimated to be Rs 3,100-3,200 billion and is expected to increase at a CAGR of 7.5-8.5% to reach Rs 3,800-3,900 billion over FY23 to FY27. 

As per the Crisil Report, Diffusion Engineers recorded the third-highest CAGR of 21% for operating income, the second-highest CAGR of 38% for profit after tax, and the third-highest CAGR of 33% for EBITDA amongst the players considered for the industry between FY21-24

Diffusion Engineers IPO - Peer Comparison

While the financial performance of Diffusion Engineers is decent on its own, we can see from the above table that, the company operates on a much smaller scale compared to its peers while delivering the same return on net worth.

Diffusion Engineers IPO Details

Diffusion Engineers IPO Date

Diffusion Engineers IPO is open to subscription from September 26, 2024, to September 30, 2024. The shares will be allocated to investors on October 1, 2024, and the company will be listed in the NSE and BSE on October 4, 2024

Diffusion Engineers IPO Issue Price

Diffusion Engineers is offering its shares in the price band of Rs.159 to Rs.168 apiece. This means you would require an investment of Rs.14,784 per lot (88 shares) if you are bidding for the IPO at the upper price band.

Diffusion Engineers IPO Size

The company is offering a total of 9,405,000 shares, amounting to Rs.158 cr which will be completely through a fresh issue.

Diffusion Engineers IPO GMP

Many investors look at the Grey Market Premium (GMP) before applying for the Diffusion Engineers. 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 Diffusion Engineers is. Thus, it is important to financially analyze the stock before investing in it.

Diffusion Engineers IPO Application Link

Open 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 Diffusion Engineers IPO

Is Diffusion Engineers IPO a Good or Bad Investment? Final Thoughts

Diffusion Engineers IPO Review: While the company has shown consistent growth and operates in diverse industries, potential investors should consider several factors. Its reliance on volatile metal raw materials could impact profitability. Furthermore, as it is relatively a small player compared to its peers, the company's future success heavily depends on its growth strategies and ability to compete effectively. Thus investors should carefully evaluate the company's expansion plans, industry trends, and competitive positioning before making a decision. 

For those interested in investing in such IPOs, you can open demat account with Rupeezy. Our trading platform allows you to participate in various investment opportunities including initial public offerings.