Is the IPO of Shapoorji Pallonji's flagship infrastructure and construction company a smart investment?
In this analysis, we look closely at Afcons Infrastructure Ltd and present you with the exclusive IPO details.
About the Issue:
Afcons Infrastructure Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. See the issue details below.
| IPO Details |
| IPO Opening Date |
October 25, 2024 |
| IPO Closing Date |
October 29, 2024 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Rs 10 per equity share |
| IPO Price |
Rs 440 to Rs 463 per equity share |
| Min Order Quantity |
32 shares |
| Listing At |
BSE, NSE |
| Total Issue |
117,278,618 shares of FV Rs 10* |
| (Aggregating up to Rs 5,430 Cr)* |
| Fresh Issue |
26,997,840 shares of FV Rs 10* |
| (Aggregating up to Rs 1,250 Cr)* |
| Offer for Sale |
90,280,778 shares of FV Rs 10* |
| (Aggregating up to Rs 4,180 Cr)* |
| QIB Shares Offered |
50% of the Offer |
| Retail Shares Offered |
35% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:
1. Capital expenditure towards the purchase of construction equipment.
2. Funding long-term working capital requirements.
3. Prepayment or scheduled repayment of a portion of certain outstanding borrowings and acceptances availed by the company.
4. General corporate purpose.
Promoter holding
Goswami Infratech Pvt Ltd, Shapoorji Pallonji and Company Pvt Ltd, Floreat Investments Pvt Ltd, Shapoorji Pallonji Mistry, Firoz Cyrus Mistry and Zahan Cyrus Mistry are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 99.48 per cent in the company.
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Company profile
Afcons Infrastructure Ltd is the flagship infrastructure, engineering, and construction company of the Shapoorji Pallonji group, which boasts a legacy of over 150 years. According to the Fitch Report, it is recognized as one of India’s largest international infrastructure companies, ranking in the 2023 ENR (Engineering News-Record, US) Top International Contractors based on international revenue for FY23.
The company operates across five major infrastructure sectors including marine and industrial, surface transport, urban infrastructure, hydro and underground, and oil & gas. Renowned projects include the Ghana Rail Project, Chenab Bridge, Atal Tunnel, MG Setu Bridge, Zambia - Lusaka City Decongestion Project, Link Project in Maldives, Kolkata Metro, and the Mumbai-Ahmedabad High-Speed Railway.
Afcons has expanded its global presence, particularly in Asia, Africa, and the Middle East, completing 79 projects across 17 countries. As of June 30, 2024, the company has 65 active projects in 12 countries, with an order book totalling Rs 317.47 billion.
Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
Q1FY25 |
| Revenue |
11,270 |
12,844 |
13,647 |
3,213 |
| Profit before tax |
407 |
600 |
673 |
135 |
| Net profit |
358 |
411 |
450 |
92 |
The company has consistently delivered decent growth in both revenue and profits over the past few years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of around 10 per cent in revenue and 12 per cent in net profit.
When annualized, the figures from the June quarter reflect a decline, primarily due to the seasonal slowdown in construction activities. Intense heatwaves and the onset of the monsoon typically hinder operations, leading both companies and the government to scale back infrastructure spending during these months. However, the company is expected to post strong performance for the full fiscal year 2025, driven by its solid order book and steady progress in ongoing projects.
Valuation & Outlook
| Company Name |
P/E |
P/B |
RoE (%)* |
| Afcons Infrastructure Ltd |
43 |
4 |
13 |
| Listed Peers |
| Larsen & Toubro Ltd |
37 |
5 |
18 |
| KEC International Ltd |
66 |
5 |
9 |
| Kalpataru Projects International Ltd |
42 |
4 |
10 |
| Dilip Buildcon Ltd |
24 |
2 |
5 |
*RoE: Based on FY24 data
The issue is priced with a P/BV ratio of 4.31 times, calculated using its Net Asset Value (NAV) of Rs 107.48 as of June 30, 2024.
When calculating the PE ratio using the company’s annualized FY25 earnings and fully diluted paid-up equity capital, the ratio stands at 43, despite weak Q1 earnings attributable to seasonal trends. In contrast, the PE ratio based on FY24 earnings is 35, significantly outperforming listed peers in terms of both valuation and returns.
The company, having already completed challenging, unique, and ‘first of its kind’ infrastructure projects, is well-positioned to capitalise on the significant opportunities driven by the government's focus on infrastructure development. With a robust order book of Rs 317.47 billion, the company ensures sustained financial growth, offering investors a compelling opportunity with attractive valuations and potential for solid returns. We recommend subscribing to the issue with a long-term investment outlook, given its substantial growth prospects.