Afcons Infrastructure likely to opt for Rs 4,000 cr pre-IPO placement

Afcons Infrastructure, part of Shapoorji Pallonji (SP) Group, plans to conduct a pre-listing sale of Rs 4,000 crore, according to sources. This move will attract esteemed investors, enhancing the company’s credibility and potentially scaling down the initial public offering (IPO) size ahead of its planned launch in October. Notably, this IPO will coincide with several other major listings, including those of Hyundai India, Swiggy, and NTPC Green Energy.

“The pre-IPO placement is almost finalised. The participants have established a solid valuation floor for the IPO. The pre-IPO deal is worth close to $500 million,” said a banker involved in the deal. He added that a large domestic mutual fund and a global sovereign fund will be among the allottees.

The company declined to comment on the matter.

Pre-IPO placements occur after filing the offer document. The amount raised through this route results in a reduction of the IPO size to that extent.

Afcons’ Rs 7,000-8,000 crore IPO is expected to enter the market during the second half of October. This offering is crucial for promoter Goswami Infratech (GIPL), a firm within SP Group, to fulfil its commitments to bondholders.

“Afcons is seeing strong demand from institutional investors. Some of these larger investors wanted a bigger allocation, which is not feasible at the time of the IPO, except during the anchor book to some extent,” the banker added.

Afcons’ IPO includes a fresh fundraise of Rs 1,250 crore, which it plans to use to repay debt, purchase construction equipment, and meet its working capital requirements. Sources indicate that Afcons plans to upsize its issue size due to demand for its shares. The remainder of the offering consists of a secondary share sale by GIPL, which will use the proceeds to repay bondholders.

GIPL has pledged Afcons shares to its lenders. The company has amended the pledge agreement to allow for the release of shares if it opts for pre-IPO sales, according to a source.

“As of the date of this draft red herring prospectus (DRHP), an aggregate of 330.9 million equity shares held by our promoters, including GIPL, Shapoorji Pallonji, and Floreat Investments, representing 97.11 per cent of our share capital, remain pledged in favour of certain lenders and a debenture trustee. Of these, 75 million pledged equity shares held by GIPL have been released prior to the filing of the DRHP towards the minimum promoter contribution, pursuant to and subject to the terms and conditions set out in the consent... Further, the pledge on the remaining equity shares of the company, held by GIPL, which will be included in the offer for sale, will be released five business days prior to the filing of the updated DRHP with the Securities and Exchange Board of India,” Afcons states as one of the ‘risk factors’ in its DRHP.

Afcons will be the second IPO from SP Group after Sterling and Wilson Renewable Energy in 2019.