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Afcons Infrastructure, the construction arm of the USD 7 billion Shapoorji Pallonji Group, is set to launch a INR 1,000-1,500 crore IPO this year, aiming to enhance visibility and propel growth rather than due to capital needs. Investment bankers including Axis Capital Markets, IIFL Securities, and SBI Capital Markets have been appointed for the IPO process, with a draft prospectus expected in the coming months.
The decision to go public stems from the promoters' desire to elevate the company to the next level of growth and compete with other major construction firms, according to sources familiar with the matter. The current government's focus on infrastructure development and the robust capital market environment further support Afcons' decision to go public this year, with infrastructure being a key sector attracting investor interest.
The IPO structure, whether it will be an offer for sale, a fresh issue, or a combination, is currently being deliberated. Shapoorji Pallonji and Company hold a 99.48 percent stake in Afcons Infrastructure.
As the flagship company of the Mumbai-based SP group, Afcons Infrastructure boasts an order book exceeding INR 30,000 crore, providing revenue visibility for the next 2-3 years. The company's portfolio includes projects spanning bridges, roads, hydro projects, port terminals, and townships. While 70 percent of its revenues are derived domestically, the remaining 30 percent are from international projects, with only 1.4 percent of its order book coming from group companies. Notably, Afcons Infrastructure's high-profile projects include the 1.3 km Chenab Bridge, a part of the 272 km Udhampur-Srinagar-Baramulla rail link.
With a consistent annual growth rate of 16 percent over the last 5-6 years, Afcons Infrastructure reported a consolidated net profit of INR 411 crore in FY23, with a total income of INR 12,844 crore. Credit rating agency ICRA anticipates revenue growth of 13-15 percent in FY24, with an operating margin expected to remain stable at 10 percent.
In FY23, Afcons Infrastructure secured orders worth INR 7,922 crore from India and overseas markets. The company has outlined a growth strategy under Vision 2027, covering FY23 to FY27. Noteworthy orders received in FY24 include a INR 5,422 crore contract for tunnelling work as part of the Mumbai-Ahmedabad high-speed rail link, a INR 233 crore project for a potable water system in Ghana, and a INR 741 crore water treatment plant project in Maharashtra.
Overall, Afcons Infrastructure's IPO launch signifies a strategic move to capitalise on market opportunities, driven by the current infrastructure thrust and favourable capital market conditions. With a strong financial performance and a robust project pipeline, Afcons Infrastructure aims to leverage its IPO to fuel further growth and cement its position as a leading player in the infrastructure construction sector.
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