Afcons Infrastructure Limited is an infrastructure engineering and construction company of the Shapoorji Pallonji group. It’s a 5430 crore issue with a fresh issue of 1250 crore and rest being offer for sale.

About Afcons Infrastructure IPO:

• Founded in 1865, Shapoorji Pallonji Group (SP Group) is a diversified institution and has a leading presence in engineering & construction, infrastructure, real estate, water, energy and financial services sectors across the globe.
• The company’s projects cover 5 major infrastructure business verticals
  • (i) Marine and Industrial
  • (ii) Surface Transport
  • (iii) Urban Infrastructure,
  • (iv) Hydro and Underground
  • (v) Oil and Gas Projects.
• The company has operations in 30 countries since its inception.
• In the 2023 ENR (Engineering News-Record, US) Top International Contractors rankings, the company was the 10^th largest international marine and port facilities contractor in the world and the only Indian company in the top 25, the 12th largest contractor in the bridges segment and the only Indian company in the top 25, the 42^nd largest contractor in the transportation segment and the only Indian company in the top 50, and the 18^th largest contractor in the transmission lines and aqueducts segment, in each case based on International Revenue for the FY 2023.
• The promoters of the Company are Goswami Infratech Private Limited, Shapoorji Pallonji and Company Private Limited and Floreat Investments Private Limited.

Financials : Afcons Infrastructure IPO

Anchors: Afcons Infrastructure IPO

Afcons Infrastructure Ltd has mobilised Rs 1,621 crore from anchor investors, a day before its initial share sale. Institutions participated in the anchor book include HDFC Mutual Fund (MF), ICICI Prudential MF, BlackRock, Fidelity Investments, Goldman Sachs, HSBC Group, Nomura, Nippon India MF, Enam Holdings, Mirae MF, Quant MF, Invesco MF, Eastbridge, Amundi, Invesco HK and SBI General Insurance. Of 3.5 crore equity shares, 1.17 crore equity shares worth Rs 542.2 crore were allocated to 15 domestic mutual funds through a total of 31 schemes. This accounts for 33.44 per cent of the total anchor book size.

Salient Points: Afcons Infrastructure IPO

• 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 is expected to be mainly driven by expanding investment in construction in emerging markets.
• The offer size was reduced following a pre-IPO raise. In draft papers, the company initially planned to raise Rs 7,000 crore through the initial share sale.
• The company will utilise Rs 80 crore from the fresh issue proceeds to buy construction equipment, Rs 320 crore for long-term working capital, Rs 600 crore to repay debt, and the rest for general corporate purposes
• Revenues from different Verticals:

• It has 30% revenues from exports.
• The company was also accorded the status of Five Star Export House.
• The company has longstanding relationships with several private and government clients globally. This includes Arcelor Mittal, an association of over 10 years, ARISE Integrated Industrial Platforms (IIP) an association of over 5 years, and a leading global food and agribusiness company headquartered in Singapore.
• Company was India’s largest international infrastructure company as per the 2023 ENR (Engineering News-Record, US) Top International Contractors rankings, based on its International Revenue for FY23. 
• During the last 11 financial years company has successfully completed 79 projects across 17 countries with a total historic executed contract value of ₹ 56,305 Cr.
• They have good experienced in building bridges including “cast-in-situ”, precast, pre-stressed concrete, cable stayed and structural steel bridges, including arch bridges for railways and roads.
• The company has worked on several complex projects like Chenab Bridge- tallest single-arch railway bridge in the world, Atal Tunnel – the world’s longest highway tunnel located at 3,000 metres above sea level.
• Some of the company’s ongoing projects include Kolkata Metro- Design and construction of tunnels below the Hooghly River; Male to Thilafushi Link Project, Maldives and Construction of a 21 km long tunnel including India’s first undersea rail tunnel (7 km long) for the Mumbai – Ahmedabad high speed rail corridor.
• As of September 30, 2024, its order book stood a notch above Rs. 40000 cr. As of June 30, 2024, the company has 65 active projects across 12 countries, aggregating to an order book of ₹31,747 Cr. Additionally, as of September 30th, 2024, the company was an ‘L1 bidder’ in projects worth ₹ 10,732.36 Cr.
• The offer is made at a P/E of 37.9 x the FY2024 EPS.
• The Anchor book saw a good response and attracted some Ace Investors like Madhu Kela’s Chartered Finance & Cohesion MK Best Ideas who invested ₹70 Cr. Alchemy Capital’s Lashit Sanghvi who has invested ₹30 Cr.
• On the flip side:
  • Post IPO, promoter holding will fall to 50.2%. Promoters look to be in need of funds and there is considerable dilution.
  • Promoter had borrowed Rs. 14,300 cr from global investors in year 2023, at exorbitant rate of 18.75% p.a., which is indicative of the financial stress at the group level.
  • Last IPO by the group SW solar (Now sold to Reliance) has ended in losses for investors
  • There are some one offs in FY24 figures and so actual profit is lower.
• I am neutral on Afcons Infrastructure IPO given the present market conditions. While company has unique ability to handle complex engineering projects and has a good order book, in the short run, much will depend on how market moves in next few days. Their performance is marred by issues of financial stress of the group. From for a longer perspective it looks OK and it project capabilities and execution track record is good.
• GMP as reported on social media is low. < 10%
• This post is exploratory and educational purposes only.
• Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.