Azad Engineering IPO: 10 things to know before subscribing to the Rs 740-crore issue

Azad Engineering Limited's IPO is set to open for subscription on December 20. The Rs 740-crore issue consists of a combination of fresh shares of Rs 240 crore by the company and an offer-for-sale of shares worth Rs 500 crore by existing shareholders.

Here are 10 key things to know before subscribing to the offer:

1.) IPO Dates

The IPO will open for subscription on December 20, 2023, and close on December 22, 2023.

2.) Price Band

The price band for the issue has been fixed at Rs 499-524 per share.

3.) Offer Details

The company is planning to raise Rs 740 crore via the IPO. Promoter Rakesh Chopdar will be offloading Rs 204.97 crore worth of shares and investor Piramal Structured Credit Opportunities Fund will be selling off Rs 260.85 crore shares. Another selling shareholder DMI Finance will sell off Rs 34.18 crore shares in the OFS.

The public offer includes a reservation of Rs 4 crore worth of shares for the company's employees. The offer excluding the employee reservation portion is the net offer.

Also Read: Azad Engineering IPO: Rs 740-crore public issue opens on December 20

4.) Objectives of the Issue

Of the fresh issue proceeds, the company will spend Rs 60.4 crore for buying plant and machinery, and repay debts amounting to Rs 138.19 crore. Its borrowings stood at Rs 154.2 crore as of September 2023. The remaining amount will be used for general corporate purposes.

5.) Lot Size

Investors can bid for a minimum of 28 equity shares and multiples of 18 after that. Hence the minimum investment by retail investors would be Rs 13,972 (28 (Lot size) x 499 (lower price band)). At the upper end, the bidding amount will increase to Rs 14,672.

6.) Company Profile

Incorporated in 1983, Azad Engineering Limited is a manufacturer of aerospace components and turbines. The company supplies its products to original equipment manufacturers (OEMs) in the aerospace, defence, energy, and oil and gas industries. The company has four manufacturing facilities in Hyderabad, Telangana, India.

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Its customers include General Electric, Honeywell International Inc., Mitsubishi Heavy Industries Ltd, Siemens Energy, Eaton Aerospace and MAN Energy Solutions SE.

7.) Financials

Azad Engineering experienced financial volatility, witnessing a 71.2 percent year-on-year decline in net profit, amounting to Rs 8.5 crore for the quarter ending March FY23. This decline was attributed to a weak operating margin and elevated finance costs.

Despite this, revenue from operations for the same period grew 29.4 percent, reaching Rs 251.7 crore. EBITDA increased by 16 percent to Rs 72.3 crore, however, the margin saw a decrease of 330 basis points, settling at 28.7 percent compared to the preceding fiscal year.

8.) Lead Managers

Axis Capital Limited, ICICI Securities Limited, SBI Capital Markets Limited and Anand Rathi Securities Limited are the book-running lead managers of the Azad Engineering IPO, while Kfin Technologies Limited is the registrar for the issue.

9.) Risks

i.) The company depends on third-party suppliers for raw materials, plant, machinery and components. Such suppliers may not fulfil obligations promptly. Any such delay can adversely affect the business, results of operations, financial condition, cash flows and prospects.

ii.) Some of its manufacturing facilities and offices including registered and corporate offices are located on land parcels that are not owned by Azad and are held on a leasehold basis. There could be a chance that the company is unable to renew such leasehold rights and in turn affect operations, financial condition, and cash flows.

iii.) The company has operated manufacturing facilities in the past without obtaining the requisite government approvals. These manufacturing facilities are subject to risks of not receiving the necessary regulatory approvals in time or at all and Azad may face regulatory actions in the future.

10.) Listing Date

Azad Engineering IPO will list on BSE, and NSE with a tentative listing date fixed as Thursday, December 28, 2023.