Afcons Infrastructure IPO Day 3 Live Updates: Issue booked 2.63x led by NIIs. Retail portion subscribed 94%

Afcons Infrastructure IPO has been subscribed 2.63 times on the third day of subscription today, as per BSE data.

The initial share sale received bid for 22,78,22,496 shares against 8,66,19,950 shares on offer, according to BSE.

The portion for retail investors received 94% subscription while the quota for non-institutional investors got subscribed 5.05 times. The qualified institutional buyers (QIBs) part is booked 3.79 times. The employee portion has been subscribed 1.67 times.

The brokerage highlighted its substantial experience in executing high-value and intricate projects that yield improved margins. Their geographical diversification across various sectors expands their revenue sources and reduces risks. Given their strong order book and proven history of successful project completions, the brokerage firm recommends a “Subscribe” rating for medium- to long-term investments.

“ Investors should look at IPO offers which come with nearly 77% OFS i.e ₹ 4180/- cr with total issue of ₹5430 cr which is an area of concern for new investors. Given the company’s advanced equipment base and proven execution capabilities and strategic market position make them a key player in infrastructure sectors. Hence, by looking at all attributes we recommend investors to “SUBSCRIBE” the Afcons Infrastructure Ltd for long term perspective only,” the brokerage said. 

The initial public offer of Afcons Infrastructure IPO has been subscribed 2.57 times on the third day of subscription today, at 15:45 IST, as per BSE data.

The initial share sale received bid for 22,26,03,040 shares against 8,66,19,950 shares on offer, at 15:45 IST, according to BSE.

The portion for retail investors received 86% subscription while the quota for non-institutional investors got subscribed 4.98 times. The qualified institutional buyers (QIBs) part is booked 3.79 times. The employee portion has been subscribed 1.62 times.

Afcons Infrastructure IPO has book running lead managers including ICICI Securities Limited, Dam Capital Advisors Ltd (formerly known as Idfc Securities Ltd), Jefferies India Private Limited, Nomura Financial Advisory and Securities (India) Pvt Ltd, Nuvama Wealth Management Limited, and SBI Capital Markets Ltd. Additionally, Link Intime India Private Ltd will serve as the registrar for the issue.

"Given its solid financials and proactive growth strategies, the company is positioned for a favourable valuation . The IPO is pegged at a PE multiple of 36x. In light of Afcons Infrastructure's robust growth potential, solid financial performance and strategic initiatives aimed at market expansion, we recommend a ‘SUBSCRIBE’ rating for the company," the brokerage said. 

The initial public offer of Afcons Infrastructure IPO has been subscribed 1.50 times on the third day of subscription today, at 13:57 IST, as per BSE data.

The initial share sale received bid for 12,95,99,136 shares against 8,66,19,950 shares on offer, at 13:57 IST, according to BSE.

The portion for retail investors received 59% subscription while the quota for non-institutional investors got subscribed 3.12 times. The qualified institutional buyers (QIBs) part is booked 1.87 times. The employee portion has been subscribed 1.44 times.

“At the upper band company is valuing at 37.9x its FY24 earnings along with being valued at 46.3x if we annualize FY25 earnings. Following the issuance of equity shares, the company's market capitalisation stands at ₹1,70,261.8 million, with a market cap-to-sales ratio of 1.34 based on its FY24 earnings. We believe that the issue is fully priced and recommend “Subscribe – Long Term” rating to the IPO,” the brokerage said. 

As per the red herring prospectus (RHP), the company's listed peers are Larsen & Toubro Ltd (with a P/E of 37.14), KEC International Ltd (with a P/E of 74.67), Kalpataru Project International Ltd (with a P/E of 42.20), and Dilip Buildcon Ltd (with a P/E of 37. 63)

The initial public offer of Afcons Infrastructure IPO has been subscribed 97% on the third day of subscription today, at 12:21 IST, as per BSE data.

The initial share sale received bid for 8,38,36,864 shares against 8,66,19,950 shares on offer, at 12:21 IST, according to BSE.

The portion for retail investors received 51% subscription while the quota for non-institutional investors got subscribed 2.26 times. The qualified institutional buyers (QIBs) part is booked 79%. The employee portion has been subscribed 1.33 times.

“The company is valued at a P/E ratio of 35.1x on the upper price band based on FY24 earnings, which is lower than the average P/E of the industry. Given its strong position in the market, the company is poised to capitalize on emerging market opportunities. Therefore, we recommend a “SUBSCRIBE” rating for the issue from a medium to long-term perspective,” the brokerage said. 

Afcons Infrastructure IPO GMP today is +40. This indicates Afcons Infrastructure share price was trading at a premium of ₹40 in the grey market, according to investorgain.com.

Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of Afcons Infrastructure share price is indicated at ₹503 apiece, which is 8.64% higher than the IPO price of ₹463.

The brokerage indicated that Afcons continued to deliver strong returns, achieving a ROE of 13.28% and a ROCE of 20.18% in FY24, reflecting solid profitability and effective use of capital. The brokerage advises subscribing to the issue as a favourable long-term investment, given the distinctive range of projects the company has engaged in, along with a robust order book and sensible valuations.

"The company focuses on delivering high-quality services in road and marine projects while leveraging its market position in new geographies. It bring attention to sustainability and profitability by managing a recurring order book of high-margin specialized projects. 

Company is also dedicated to optimizing costs while also enhancing its project delivery capabilities and capacity. At the upper band of ₹463, the issue is valued at a P/E ratio of 46.48x, based on a FY24 EPS of ₹9.96x . We are recommending a “Subscribe” for this issue," the brokerage said. 

The initial public offer of Afcons Infrastructure IPO has been subscribed 60% on the third day of subscription today, at 10:18 IST, as per BSE data.

The initial share sale received bid for 5,18,63,520 shares against 8,66,19,950 shares on offer, at 10:18 IST, according to BSE.

The portion for retail investors received 42% subscription while the quota for non-institutional investors got subscribed 1.30 times. The qualified institutional buyers (QIBs) part is booked 37%. The employee portion has been subscribed 1.11 times.

The firm has a solid history of successfully managing intricate infrastructure initiatives across five key sectors: Marine & Industrial (8%), Surface Transport (10%), Urban Infrastructure (50%), Hydro & Underground (26%), and Oil & Gas (6%). Their capability to finish substantial projects punctually frequently leads to receiving performance bonuses.

The company plans to allocate ₹80 crore from the net fresh issue proceeds for the purchase of construction equipment and ₹320 crore for long-term working capital requirements.

The company plans to allocate ₹600 crore for debt repayment, with the remaining IPO funds earmarked for general corporate purposes.

The brokerage indicates that the company boasts a strong order book surpassing ₹40,000 crore as of September 2024, mainly in the underground metro and rail industries. This provides solid earnings visibility for the next two to three quarters. The company’s strong relationships with clients, including long-term partnerships with Arcelor Mittal and Reliance Industries, bolster its competitive advantage. 

Although capital-intensive operations and significant depreciation affect profit margins, the company has demonstrated substantial financial growth from FY22 to FY24, with revenues, EBITDA, and PAT experiencing CAGRs of 9.7%, 20.8%, and 12.1%, respectively. Consequently, the brokerage advises a “Subscribe” rating for the issue.

Tentatively, Afcons Infrastructure IPO basis of allotment of shares will be finalised on Wednesday, October 30, and the company will initiate refunds on Thursday, October 31, while the shares will be credited to the demat account of allottees on the same day following refund. Afcons Infrastructure share price is likely to be listed on BSE and NSE on Monday, November 4.

Afcons Infrastructure IPO has reserved not more than 50% of the shares in the public issue for qualified institutional buyers (QIB), not less than 15% for non-institutional Institutional Investors (NII), and not less than 35% of the offer is reserved for retail investors. A discount of ₹44 per equity share is being offered to eligible employees.

The brokerage notes that while Afcons excels at managing large, complex projects, it has lagged behind its competitors in revenue growth, achieving a 10% CAGR from FY22 to FY24. In contrast, L&T, which is significantly larger than Afcons, has experienced much faster growth. Afcons maintains higher asset turnover than its rivals, leading to a better ROCE. 

Although Afcons has a strong order book-to-sales ratio of 2.4x, the orders will take several years to complete. Afcons is currently priced at a 15% premium compared to the average of its peers based on P/E, which seems unjustified given Afcons’ slower growth. As a result, the brokerage has assigned a ‘NEUTRAL’ rating to the IPO.

Afcons Infrastructure IPO GMP today is +40. This indicates Afcons Infrastructure share price was trading at a premium of ₹40 in the grey market, according to investorgain.com.

Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of Afcons Infrastructure share price is indicated at ₹503 apiece, which is 8.64% higher than the IPO price of ₹463.

According to the grey market activities observed over the last 31 sessions, the present GMP ( ₹40) indicates a downward trend. The lowest recorded GMP is ₹0, while the peak GMP is ₹225, as per the insights from investorgain.com experts.

'Grey market premium' indicates investors' readiness to pay more than the issue price.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.