Afcons Infra IPO Day 2: Subscription lags at 0.19x, GMP holds at 5%; bid?

Afcons Infrastructure, the flagship company of Shapoorji Pallonji Group, has garnered a lackluster response to its Rs 5,430-crore initial public offering (IPO), which launched on October 25, 2024. As of Monday, 11:48 AM, the issue has been subscribed 0.19 times, with bids received for 1.62 crore shares against 8.66 crore shares on offer, as per the NSE data.

  Retail Individual Investors (RIIs) have subscribed 0.26 times, while Non-Institutional Investors have placed bids for 0.23 times. Meanwhile, the quota reserved for Qualified Institutional Buyers (QIBs) has received the lowest participation from investors, with bids for 2,50,944 shares against 2,45,68,181 shares offered for this category.

 

That said, the unlisted shares of Afcons Infrastructure are commanding a positive premium in the grey markets on Monday. Tracking grey market activities reveals that Afcons Infrastructure shares are trading at a premium of Rs 23, which translates to a GMP of 5 per cent against the upper end of the IPO price of Rs 463.

 

Afcons Infrastructure IPO, which is available at a price band of Rs 440-463 and a lot size of 32 shares, is set to close for subscription on Tuesday, October 29, 2024.  Following the closure of the IPO subscription window, the basis of allotment for the company’s shares is likely to be finalised on Wednesday, October 30, 2024.

 

Afcons Infrastructure shares are expected to make their market debut on Monday, November 4, 2024, by listing on the BSE and NSE.

 

Link Intime India is the registrar for the Afcons Infrastructure IPO, while Jefferies India, Nomura Financial Advisory and Securities (India), Nuvama Wealth Management, ICICI Securities, Dam Capital Advisors, and SBI Capital Markets are the book-running lead managers of the public issue.

 

Afcons Infrastructure proposes to utilise the net proceeds from the public issue for capital expenditure toward the purchase of construction equipment, as well as for funding long-term working capital requirements. The company also intends to use the proceeds for the prepayment or scheduled repayment of a portion of certain outstanding borrowings and acceptances, as well as for general corporate purposes.

 

Should you subscribe to the Afcons Infrastructure IPO?

 

Anand Rathi Research - Subscribe for long term  

Analysts at Anand Rathi Research have assigned a "Subscribe for Long Term" rating on the Afcons Infrastructure IPO, citing that the issue is fully priced. According to the analysts, at the upper band, the 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 Rs 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 a 'Subscribe - Long Term' rating for the IPO," said the analysts.

 

Geojit - Subscribe for medium to long term  

According to the brokerage firm, at the upper price band of Rs 463, AIL is trading at a P/E ratio of 38x for FY24, which is in line with its peers. With the government’s initiatives aimed at infrastructure development, including increased budgetary allocations and the rapid pace of urbanisation, AIL is strategically positioned for substantial growth. Considering its extensive experience in completing high-value and complex projects that offer better margins, Geojit noted in a research report that geographical diversification across multiple sectors broadens their revenue base and mitigates risks.

 

"With a robust order book and a successful track record of project completion, we assign a 'Subscribe' rating for medium- to long-term investment," stated Geojit in a research note. READ MORE

 

Afcons Infrastructure is the flagship infrastructure, engineering, and construction company of the Shapoorji Pallonji Group, a diversified Indian conglomerate with a legacy of over six decades. The company has a strong track record of executing numerous complex, challenging, and unique engineering, procurement, and construction (EPC) projects both within India and internationally.