After Tata Technologies’ massive IPO success, it’s now time for another chance to make the most of the primary market.
We are talking about the Azad Engineering IPO that opened doors for investors in their initial public offering on December 20, 2023. The Sachin Tendulkar-backed aerospace component manufacturer is a monopoly stock, having an upper hand in the market at present.
On December 28, the IPO shares of Azad Engineering are probably going to be listed on the secondary market. After that, we can get an idea of Azad Engineering’s share price on NSE, depending on the market condition.
In today’s article, we will deep dive into the Azad Engineering IPO and discuss A to Z of the company – from its history and evolution to IPO details and whether it is right for you or not. Let’s begin!
What is Azad Engineering?
Azad Engineering Limited manufactures turbines and aircraft components. The company supplies its products to original equipment manufacturers (OEMs) in the energy, oil and gas, aerospace, and defence industries.
The organisation produces precision machined and forged parts that are highly sophisticated, mission and life-critical. As a result, some of their products are required to have a zero parts per million defect rate.
According to Rakesh Chopdar, founder and managing director of Azad Engineering, change is an endless journey. At 16, he left school to work in an engineering shop, where he gained a thorough understanding of the field. Early in his professional life, Rakesh had his “Eureka!” moment when he found aerofoils, which would later become a gem for Azad’s crown.
At present, they serve the energy sector, the aerospace sector, as well as those who want to go to space. They have shown the capacity to provide these areas with the best components available. They have proven that the combined effect of their outstanding management, operational competence, and technological skills is their biggest asset.
Azad Engineering Mission and vision
Azad Engineering strives to become a leading manufacturer of turbine and aerospace components worldwide by offering its clients high-quality goods at reasonable rates and driving rapid expansion.
With a focus on the power, aerospace, oil and gas, and automotive industries, AZAD’s mission is to produce and deliver high-precision engineering components in the future.
Azad Engineering today
Today, Azad Engineering is a market leader in its niche. Located in Hyderabad, the company has been approved to become the first Indian business to provide crucial rotating components for nuclear turbines.
The company’s main business categories are energy (which accounts for 87% of operational revenue), aerospace and defence (9%), and other industries, including scrap and oil and gas (4%).
Azad Engineering’s financials
|March 31, 2023
|March 31, 2022
|March 31, 2021
|Total income (in crores)
|Profit after tax (in crores)
|Total borrowings (in crores)
Azad Engineering’s IPO details
|Azad’s IPO Date
|20 December 2023
|IPO issue closing date
|22 December 2023
|Bidding date for anchor investors
|December 19, 2023
|₹2 per share
|Azad’s IPO share price/ Price band
|₹499 to ₹524 per share
|14,122,138 shares (up to ₹740.00 Cr)
|Offer for sale
|35.00% to retail investors30.00% to anchor investors20.00% to QIB15.00% to NII (HNI)
Azad Engineering Shareholding pattern prior to IPO
|Piramal Structured Credit Opportunities Fund
|DMIFinance Private Limited
Fund utilisation plan
In the Red Herring Prospectus of Azad Engineering, the manufacturing company intends to use the fresh issue in the following ways:
- Finance capital expenditures
- Loan repayment or prepayment, and
- Other general business requirements.
To support the manufacture of their range of products, they intend to keep investing in current production facilities, particularly their manufacturing processes and equipment. The company will incur expenses for the purchase of different kinds of equipment as part of this investment.
As a result, the organisation has determined what equipment and plants need to be bought and has received quotes from suitable suppliers. The proposal is to not use the net proceeds to buy any old or secondhand equipment.
The company plans to invest in such equipment and machinery with ₹60.395 crore (₹603.95 million) from the net proceeds.
Is it safe to invest in Azad Engineering shares?
With a near-monopoly in its niche industry, Azad Engineering has a commanding position. Over the reporting period, the company has continuously shown an upsurge in sales.
Market experts think that despite the perception of the Azad Engineering IPO issue being fully priced based on FY24 annualised profits, analysts advise that investors may find it advantageous to subscribe to the issue over a medium to long-term investment horizon, given the company’s promising future.
Why should you consider investing?
- Long-term connections with clients
The top five clients have been working with the business for more than ten years. MAN Energy Solutions, Siemens Energy, General Electric, Eaton Aerospace, Honeywell International, and Mitsubishi Heavy Industries are a few of its well-known clientele.
- High entry barriers
Because of its stringent standards of quality, it serves sectors with high entry barriers.
- Preferred name in the industry
Azad Engineering has proven to be a key manufacturer and supplier of complex and sophisticated components to global OEMs, despite the growing competition from the USA, China, Japan, and Europe.
- Advanced manufacturing facilities
With four highly advanced production facilities in Hyderabad, the company is spread out across around 20,000 square metres. Azad focuses on becoming a prominent player in the sector by leveraging advanced technologies and machinery.
- Excellent financial track record
In terms of revenue and profitability, Azad showed consistent growth. From ₹122.7 crore in FY21 to ₹251.6 crore in FY23, the total revenue climbed by 105.08%.
Factors to keep an eye out for
- Concentration of clients
61% of FY23’s income came from the top five clients, with the most valuable customer contributing 39%. This dependency might be an issue in case of disputes, which will affect the company’s revenue adversely.
- Inadequate capacity to negotiate
The majority of its raw materials come from a small number of vendors. For the six months that ended on September 30, 2023, it obtained 42.6% of its raw materials from a single source.
- High cost of financing
Azad’s financing costs increased by 284.7%, from ₹14 crore in FY22 to ₹52 crore in FY23.
When we compare Azad to other comparable capital goods companies, we can find that it has had better growth with comparable return ratios and that its value is about in line with the peer group. It is justified to expect that Azad would trade at a premium to competitors given its better track record and more favourable growth forecast.