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  • Writer's pictureJatin Agarwal

Azad Engineering IPO

Updated: Dec 20, 2023


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Azad Engineering IPO: Taking Flight on the Aviation Boom

The Indian aviation industry is gearing up for a new player to join its ranks – Azad Engineering Limited. Renowned for its high-quality turbine blades and aircraft engine components, Azad Engineering plans to raise Rs 740 crore through an initial public offering (IPO) scheduled for December 19-21, 2023. This article delves into the details of the Azad Engineering IPO, analyzing its potential and associated risks to help you make informed investment decisions.


Company Overview:

Azad Engineering Limited is a manufacturer of aerospace components and turbines. The company supplies its products to original equipment manufacturers (OEMs) in the aerospace, defense, energy, and oil and gas industries.


Azad Engineering's products are highly engineered, complex, mission-critical, and vital.

As of September 30, 2023, the company generated revenue of ₹1,142.92 million from the sale of blades for the energy industry. The company's customer base includes the USA, China, Europe, the Middle East and Japan.


Financial Performance:

Azad Engineering Limited's revenue increased by 31.24% and profit after tax (PAT) dropped by -71.24% between the financial year ending with March 31, 2023 and March 31, 2022. Revenue rose from Rs.125 crore to Rs.261.5 crore in FY 23.


IPO Details:

  • IPO Opening Date: December 20, 2023.

  • IPO Closing Date: December 22, 2023.

  • Listing Date: December 27, 2023 (tentative).

  • Promoter Holding (Pre-IPO): 74.52%.

  • Promoter Holding (Post-IPO): 54.52%.

  • Price Band: Rs 499-524 per share.

  • Lot Size: 28 shares.


Objectives of the Issue:

The funds raised through the IPO will be utilized for the following purposes:

  • Debt reduction: A significant portion of the proceeds will be allocated to pay off existing debt, improving the company's financial health and potentially reducing interest expenses.

  • Working capital requirements: The company plans to utilize a substantial amount of the capital to meet its day-to-day operational needs and support its growth prospects.

  • General corporate purposes: The remaining funds will be used for other business activities such as technology upgradation, research and development, and brand building.


Potential and Risks:

Potential:

  • Booming aviation industry: The Indian aviation industry is expected to be one of the fastest-growing globally, driven by factors like rising income levels and increased travel demand. Azad Engineering's strong presence in the sector positions it well to benefit from this growth.

  • Technological expertise: The company's proven track record in supplying critical components for global players speaks volumes about its technological expertise and quality standards.

  • Government support: The Indian government's focus on boosting the domestic aviation industry through initiatives like "Make in India" presents potential tailwinds for Azad Engineering.

Risks:

  • Competition: The aviation component manufacturing market is fiercely competitive, with established players like Safran and Honeywell. Azad Engineering needs to maintain its cost competitiveness and technological edge to stand out.

  • Dependence on key clients: The company's reliance on a few major customers for a significant portion of its revenue poses vulnerability to fluctuations in their demands.

  • Volatility in demand: The cyclical nature of the aviation industry can lead to fluctuations in demand for Azad Engineering's products, impacting its profitability.


IPO Grey Market Premium (GMP):

As of December 18, 2023, the Azad Engineering IPO has a Grey Market Premium (GMP) of Rs. 440 per share. This indicates a positive market sentiment and potential investor interest in the issue. It's important to remember that GMP is an unofficial gauge and not a guarantee of actual listing price or future performance.


Conclusion:

The Azad Engineering IPO presents both promising opportunities and potential pitfalls for investors. The thriving aviation industry, technological expertise, and government support offer intriguing growth prospects. However, the competitive landscape, dependence on key clients, and cyclical demand warrant careful consideration. Investors should thoroughly analyze these factors and conduct their own research before making investment decisions in the Azad Engineering IPO.


Disclaimer: All information is provided for educational and informational purposes only. Data is fetched from publicly available sources such as the DRHP filed by the company and other reliable sources. The website or the author takes no guarantee for the accuracy of the data; however, we have tried our best to present accurate data to our readers. Please consult a financial advisor or do your own analysis before investing/trading in the stock market.

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