Shapoorji Pallonji Group’s flagship infrastructure firm, Afcons Infrastructure Limited, files DRHP for Rs 7,000 crore IPO

 Shapoorji Pallonji group’s flagship infrastructure engineering and Construction Company, Afcons Infrastructure Limited (AIL), has filed its draft red herring prospectus (DRHP) with the market regulator, Securities and Exchange Board of India (SEBI), to raise funds through an initial public offering (IPO).

 

The IPO, with a face value of Rs 10 per equity share, is a mix of fresh issue of shares of Rs 1,250 crore and an offer for sale of up to Rs 5,750 crore by Goswami Infratech Private Limited. The offer includes a reservation for subscriptions by eligible employees. As per the market sources, it is the largest infra IPO in a decade.

 

The company, in consultation with the book-running lead managers, may consider undertaking a further issue of equity shares through a preferential issue or any other method for a cash consideration aggregating up to Rs 250 crore as a "pre-IPO placement.". If such placement is completed, the fresh issue size will be reduced.

 

The offer is being made through the book-building process, wherein not more than 50% of the net offer shall be available for allocation on a proportionate basis to qualified institutional buyers, not less than 15% of the net offer shall be available for allocation to non-institutional bidders, and not less than 35% of the net offer shall be available for allocation to retail individual bidders.

 

Afcons Infrastructure Limited is an Indian conglomerate with a rich history spanning over six decades. The company has a proven track record of successfully delivering a wide range of complex and challenging engineering, procurement, and construction (EPC) projects both domestically and internationally. According to the Fitch Report, Afcons is recognized as one of India’s leading international infrastructure firms, as per the 2023 rankings by Engineering News-Record (ENR) based on international revenue for the financial year 2023.

 

Afcons operates across five major infrastructure business verticals:

· Marine and Industrial, encompassing projects such as ports, harbors, dry docks, LNG tanks, and material handling systems.

· Surface transport, including highways, interchanges, mining infrastructure, and railways.

· Urban infrastructure, covering metro works, bridges, flyovers, and elevated corridors.

· Hydro and Underground, comprising dams, tunnels, and water-related projects.

· Oil and Gas, involving offshore and onshore projects in the oil and gas sector.

 

The company has a strong international presence across various infrastructure sectors, as highlighted in the 2023 ENR rankings. Afcons ranks among the top international contractors globally in marine and port facilities, bridges, transportation, and transmission line segments based on international revenue for the financial year 2023, according to the Fitch Report.

 

Afcons has a history of completing projects ahead of schedule, including notable ones like the Jammu Udhampur Highway Project, Nagpur Metro Reach 3, and Agra Lucknow Expressway. As of September 30, 2023, Afcons is actively involved in 67 active projects across 13 countries.

 

In terms of financial performance, Afcons stands out among its peers in India, boasting the highest return on capital employed (ROCE) and return on equity (ROE) margins for the financial year 2023, as mentioned in the Fitch Report.

 

The company's global footprint extends across Asia, Africa, and the Middle East, where it has undertaken groundbreaking infrastructure projects. Some notable completed projects include the Chenab Bridge in Jammu & Kashmir and the Atal Tunnel in Himachal Pradesh. Ongoing projects like the Kolkata Metro and the Male to Thilafushi Link Project in the Maldives demonstrate Afcons' continued commitment to innovation and excellence in the infrastructure sector.

 

As of September 30, 2023, Afcons has an impressive equipment base, including marine barges, cranes, tunnel boring machines, jack-ups, and piling rigs. The company maintains two dedicated workshops in Delhi and Nagpur for equipment maintenance.

 

In terms of listed industry peers, Afcons compares itself with Larsen & Toubro Limited (L&T), KEC International Limited (KEC), Kalpataru Project International Limited (KPIL), and Dilip Buildcon Limited (DBL).

 

AIL's order book has increased at a CAGR of 7.6% from ₹26,248.46 crore in the financial year 2021 to ₹30,405.77 crore in the financial year 2023. As of September 30, 2023, it stood at ₹34,888.39 crore.

 

Afcons’ restated consolidated revenue from operations during the fiscal year 2023 increased 14.69% to Rs 12,637.38 crore from Rs 11,018.97 crore in the previous year, primarily due to an increase in construction contract revenue, driven by an increase in business in its Urban Infrastructure and Hydro and Underground business verticals, both in India and overseas. Profit after tax grew 14.89% from Rs 357.60 crore for the financial year 2022 to Rs 410.86 crore for the financial year 2023.

 

For the six months ended September 30, 2023, revenue from operations stood at Rs 6,505.39 crore, and profit after tax stood at Rs 195.13 crore.

 

According to the Fitch Report, the Indian infrastructure industry has grown at a compounded annual growth rate of 11.4%, from ₹5.04 trillion in the financial year 2018 to ₹7.75 trillion in the financial year 2022. Further, Fitch estimates India’s infrastructure industry to grow at a compounded annual growth rate of 9.9% from ₹8.56 trillion in the Financial Year 2023 to ₹13.72 trillion in the Financial Year 2028.

 

Recently, Ludhiana-based EPC and HAM Player Ceigall India Limited has filed its Draft Red Herring Prospectus (DRHP) consisting of a fresh issue of Rs 617.69 crore and an offer for sale of up to 14.28 million equity shares by the Promoter and Promoter Group Selling Shareholders and Individual Selling Shareholder.

 

ICICI Securities Limited, DAM Capital Advisors Limited, Jefferies India Private Limited, Nomura Financial Advisory and Securities (India) Private Limited, Nuvama Wealth Management Limited, and SBI Capital Markets Limited are the book-running lead managers, and Link Intime India Private Limited is the registrar of the issue.