Azad Engineering IPO: Rs 740-crore Public Issue Opens on December 20

Azad Engineering, a leading Telangana-based manufacturer of precision forged and machined components for various industries, is set to launch its maiden initial public offering (IPO) worth Rs 740 crore. The company has announced that the IPO subscription will open on December 20, 2023. The price band for the IPO will be disclosed on December 15.

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The IPO is scheduled to close on December 22, with the anchor book set to open for a single day on December 19.

Azad Engineering’s IPO comprises two components – a fresh issue of shares to raise Rs 240 crore and an offer-for-sale (OFS) portion of Rs 500 crore. Promoter Rakesh Chopdar plans to sell shares worth Rs 204.97 crore, while investor Piramal Structured Credit Opportunities Fund will sell shares worth Rs 260.85 crore. The remaining OFS shares, valued at Rs 34.18 crore, will be offered by DMI Finance.

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Currently, the promoters hold a 78.61 percent stake in the company, with Rakesh Chopdar alone owning 77.46 percent of the shares. The public shareholding stands at 21.39 percent, which includes a 9.13 percent stake held by Piramal Structured Credit Opportunities Fund.

As part of the IPO, the company has reserved Rs 4 crore worth of shares for its employees, with the remaining portion representing the net offer to the public.

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Azad Engineering has allocated 50 percent of the net offer size for qualified institutional buyers (QIBs), 15 percent for high-net-worth individuals (HNIs), and the remaining 35 percent for retail investors.

Proceeds from the fresh issue will be utilized primarily for the purchase of plant and machinery (Rs 60.4 crore) and repaying debts amounting to Rs 138.19 crore. The company reported a total borrowing of Rs 154.2 crore as of September 2023, and the remaining funds will be directed towards general corporate purposes.

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Azad Engineering specializes in providing components to original equipment manufacturers (OEMs) in the energy, aerospace and defense, and oil and gas sectors. Despite financial volatility, the company saw its revenue from operations increase by 29.4 percent to Rs 251.7 crore in the quarter ending March FY23. However, its net profit declined by 71.2 percent year-on-year to Rs 8.5 crore during the same period, primarily due to a weak operating margin and higher finance costs. EBITDA for the period grew by 16 percent to Rs 72.3 crore.

For the six months ending September FY24, Azad Engineering reported a net profit of Rs 27 crore on revenue of Rs 158.7 crore.

Commenting on their business, the company stated, “As of September 2023, we generated a revenue of Rs 114.3 crore from the sale of airfoils/blades for the energy industry, which comprised 72 percent of our revenue from operations. We compete with manufacturers from China, Europe, USA, and Japan.”

Azad Engineering serves a prestigious clientele across various sectors, including General Electric, Honeywell International Inc., Mitsubishi Heavy Industries Ltd, Siemens Energy, Eaton Aerospace, and MAN Energy Solutions SE.

The basis of IPO share allotment is expected to be finalized by December 26, with equity shares scheduled to be credited to successful investors’ demat accounts by December 27. Trading of Azad Engineering shares will commence on December 28, following the T+3 timeline, as per the IPO schedule.

Axis Capital, ICICI Securities, SBI Capital Markets, and Anand Rathi Advisors are the book running lead managers for the IPO, while KFin Technologies will serve as the registrar to the offer. Investors and industry enthusiasts are eagerly awaiting this milestone event in Azad Engineering’s journey.

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