Azad Engineering makes strong debut; lists at 37% premium over issue price

Azad Engineering IPO had received a robust response with the issue being subscribed 80.6 times. Sportsperson Sachin Tendulkar, PV Sindhu, Saina Nehwal and Nikhat Zareen are among shareholders.

Azad Engineering made a strong stock market debut on Thursday, with its shares listed at Rs 720, a 37 per cent premium over its issue price of Rs 524 per share on the National Stock Exchange (NSE). On the BSE, the stock of heavy electric equipment company opened at Rs 710.

At 10:04 AM; Azad Engineering was quoting at around Rs 719 on the NSE and BSE. The stock hit a high of Rs 727 and a low of Rs 701 in intra-day trades so far. A combined 5.9 million equity shares have changed hands on the NSE and BSE.

The initial public offering (IPO) of Azad Engineering received a robust response with the issue being subscribed 80.6 times. The institutional investor portion was subscribed 179.6 times, the high net worth individual portion was booked 87.6 times, the retail investor portion was bought 23.8 times, and the portion reserved for employees stood at 14.7 times.

Azad Engineering manufactures products for original equipment manufacturers (OEMs) in the energy, aerospace and defence, and oil and gas industries.

Analysts had recommended the stock, citing its debt-free status post-IPO, high net margins and lower pricing compared to peers.  In March 2023, Azad Engineering sold shares to sportspersons such as Sachin Tendulkar, PV Sindhu, Saina Nehwal and Nikhat Zareen. The average acquisition cost of these shares is lower than the IPO price as they were allotted more shares following an issue of bonus shares.

Azad Engineering is strengthening its core capabilities across the focus industries and leverage industry-leading capabilities by continuing to diversify the customer base and increase penetration and wallet share with existing customers by entering into new component lines.

The company would continue to augment manufacturing capabilities by organic and inorganic acquisitions, building scale and delivering state of the art execution with its multifold facilities coming up over the next few years which will increase its revenues base, reduce operating costs, and improve operating efficiencies deploying new technologies offering quality products at optimal prices.

Azad Engineering is one of the fastest growing manufacturers with one of the highest EBITDA margins among the key players, backed by marquee investors, unique business model, strong total addressable market (TAM) in various segments over the next few years, consistent track record of financial performance suggests a SUBSCRIBE rating for the long term, analyst at Reliance Securities had said in their IPO note.

Since the industry has high entry barriers in terms of gestation period as well as manufacturing capabilities, competitive intensity is low which is evident from the company's Gross and EBITDA margins. Upon comparing with other similar Cap Goods players, analysts at Nirmal Bang Securities observe that Azad has delivered superior growth with similar return ratios while its valuation is broadly at par with the peer group.