Azad Engineering likely to see a robust debut on the bourses

Azad Engineering IPO: Investors across categories subscribed 80.6 times

Aerospace components and turbines manufacturer Azad Engineering is all set to witness a bumper debut on the exchanges on December 28. Data from Investorgain suggests a robust listing gain of around 33 percent on the upper end of the price band of Rs 499-524 apiece.

The anticipation of a strong listing stems from the strong interest shown by investors in the company's Rs 740-crore public issue. Investors across categories subscribed 80.6 times. The qualified institutional buyers took the lead, buying 179.66 times the allotted quota. At the same time, high net worth individuals (non-institutional investors) and retail investors picked shares 87.55 times and 23.71 times the portions set aside for them, respectively.

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What's making analysts bullish on the issue?

Shreyansh Shah, a research analyst at StoxBox, estimates a 55 percent premium over the issue price. This, he suggests, will be primarily driven by the promising growth trajectory of the company due to its expertise in manufacturing highly engineered, complex, and life-critical components catering to niche industries.

Also read: Azad Engineering IPO subscribed over 80 times: Check grey market premium, other details

"We believe that the company justifies the listing premium supported by its long-term contracts, a stable customer base, and strong visibility on revenue. We advise investors who have been allotted shares to hold them from a long-term perspective and consider every dip as an opportunity to accumulate the shares," Shah further added.

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

Onkar Kelji of Indsec Securities predicts the stock to list at Rs 824, a 57 percent upside over the company's issue price. The company is one of the key manufacturers and suppliers of critical components such as 3D rotating airfoil/blades required in turbine engines across aerospace and defence, energy, and oil and gas industries. "Azad Engineering is on the cusp of strong growth as it has met the necessary client quality qualification of over 15 years. Also, increased revenue contribution from its existing clients coupled with expanding its customer base will augment growth," Kelji said.

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.

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.

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