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Azad Engineering IPO aims to raise Rs 740.00 crores. The issue is a combination of fresh issue of 0.46 crore shares aggregating to Rs 240 crores and offer for sale of 0.95 crore shares aggregating to Rs 500 crores. . Azad Engineering is a provider of engineering and technology solutions for global OEMs in the clean energy, aerospace, defence, oil & gas, and SPS Industries.

About Azad Engineering Limited :

• Azad Engineering Limited  was incorporated in 1983. 
• Azad Engineering is one of the key manufacturers of qualified product lines supplying to global original OEMs in the energy, aerospace and defence, and oil and gas industries, manufacturing highly engineered, complex and mission and life-critical components. Azad manufactures complex and highly engineered precision forged and machined components that are mission and life-critical and hence, some of their products have a “zero parts per million” defects requirement. 
• The company’s manufacturing infrastructure comprises 4 facilities in India, at Hyderabad with a total manufacturing area of ~20,000 sq. mtr. Within the energy turbine industry, airfoils contribute to the majority of the sales for the company. Other than this, the company also supplies other special machined components for energy turbines.
• Their aerospace and defence products are largely utilized in commercial and defence aircraft to provide propulsion, actuation, hydraulics, and flight control.
• Company has 4 manufacturing facilities in Hyderabad, with installed capacity of 6.4 lakh hours per annum.
• They have 2 manufacturing facilities in the pipeline. 
• The company had the backing of Piramal Structured Credit Opportunities Fund, DMI Finance Pvt Ltd and other investors.

Financials: Azad Engineering Limited

Anchor: Azad Engineering IPO

Azad Engineering raised ₹220.8 crore by selling shares to anchor investors. Prominent investors, include Abu Dhabi Investment Authority, Nippon Funds, ICICI Prudential Mutual Fund, Kotak Mahindra Trustee, Tata MF, Eastspring Investments, Bandhan MF, HDFC Life Insurance, Bajaj Allianz Life Insurance, and Max Life Insurance. ^ mutual funds participayted in anchor book through ten schemes.

Azad Engineering IPO: Salient Points

• From the fresh issue of equity shares amounting to Rs. 240 cr; Rs. 138 cr is for debt repayments and s. 60 cr for capex.
• This will bring down the debt which currently stands at Rs. 154 cr.
• In 2021, Azad Engineering closed its first round of funding of $20 million from DMI Management. DMI Management is backed by New Investment Solutions — a Liechtenstein-based asset management firm with an investment of $2 billion globally in equity, debt and alternative assets. Azad Engineering utilised the funds to set up its second manufacturing facility at Hyderabad.
• Now as part of OFS venture funds Piramal Alternatives and DMI Finance are completely exiting their 10% combined holding. This amounts to 60% of OFS.  Rest 40% of OFS is by promoters. Promoter Rakesh Chopdar, who holds a 79 percent stake., will see the stake come down to 66%.  
• Azad supplies components to some of the key manufacturers of energy turbines. In FY23, the company supplied to the customers which control approximately 70% of the gas turbine market (based on technology ownership and number of units ordered in H1 2022) globally. 
• Azad supplies components to OEMs as well as Tier 1 manufacturers in the aerospace & defence segment. The company has supplied critical components for aircraft platforms such as B737, B737 Max, B747, B777, B777X, A320, A350, A355, A350 XWB, Gulfstream G550, and is in discussions for supply of components for new engine platforms. 
• The company competes with manufacturers from China, Europe, USA, and Japan. Their customers include global OEMs across the energy, aerospace and defence, and oil and gas industries such as General Electric, Honeywell, International Inc., Mitsubishi Heavy Industries, Ltd., Siemens Energy, Eaton Aerospace and MAN Energy Solutions SE, Hindustan Aeronautics, Tatas etc
• As of September 30, 2023, they generated a revenue of ₹114.29 crore from sale of airfoils / blades for the energy industry, which comprised of 72% of their revenue from operations.
• 90% of revenue is from energy sector
• Company 4 manufacturing facilities in Hyderabad, are operating at 90% utilisation. It is developing 2 additional plants, including a dedicated unit for Mitsubishi.
• 80% of revenue is from exports, mainly to advanced nations like Japan (35%), US, Europe.
• Cricket legend Sachin Tendulkar has made a strategic investment in Azad Engineering. Tendulkar owned 4.38 lakh shares, acquired at an average price of Rs 114.10. Laxman, Nehwal and Sindhu were also alloted shares in March 2023 @Rs. 228.
• In Novemeber 2023, they delivered the first consignment of National Aerospace Standard (NAS) parts to global aircraft manufacturer Boeing.
• Azad Engineering is India’s first supplier of parts for nuclear turbines
• . Azad Engineering has signed a long-term supply agreement with General Electric (GE) Steam Power for the supply of nuclear turbineparts.
• There are significant entry barrier due to a lengthy and stringent qualification process.
• Azad Engineering IPO is coming at a PE ratio of 366(fy23 earnings) and57.6x (fy24 annualized earnings)
• PE for Peers as per RHP; MTAR Technologies – 68.8, Dynamatic Technologies – 70.5, DCX Systems 48.4, Triveni Turbines – 74.4.
• I intend to apply in Azad Engineering IPO subject to availability of funds. Valuations are not cheap but it is a technology-driven and innovative company with manufacturing facilities and high-quality products with significant entry barrier. Both Energy industry and aviation industry (defence and commercial) are experiencing good demand.
• GMP as reported on social media has been around Rs. 370.
• 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.