Incorporated in 1983, Azad Engineering Limited manufactures complex and highly engineered precision forged and machined components used in the energy, aerospace and defence, and oil and gas industries.
Its product portfolio includes 3D rotating airfoil/ blade portions of turbine engines and other critical components for gas, nuclear and thermal turbines used in industrial applications and energy generation. These components are also used in defence and civil aircrafts and spaceships.
These products are used by original equipment manufacturers (OEMs) to make final products. Some of its customers include global OEMs such as General Electric, Honeywell International Inc., Mitsubishi Heavy Industries, Siemens Energy, Eaton Aerospace and MAN Energy Solutions SE. It also supplies its components to countries such as the USA, China, Europe, the Middle East, and Japan and competes with manufacturers from China, Europe, USA and Japan.
It carried out sales in 15 countries between 31 March 2021 and 30 September 2023 and derives most of its revenue from exports to global OEMs, accounting for 89% of its total revenue from contracts as of 30 September 2023. It has manufactured and delivered 3 million units between FY09 and FY23.
It operates four advanced manufacturing facilities in Hyderabad, Telangana, with a total manufacturing area of approximately 20,000 square metres. Further, it has proposed two new manufacturing facilities in Telangana, one of them as an exclusive manufacturing facility for Mitsubishi Heavy Industries. These new facilities will be funded through internal accruals.
Between FY21 and FY23, it saw a CAGR rise of 27% in its revenue from operations. Meanwhile, the company’s profitability has remained volatile, with a net profit of ₹29.4 crore in FY22 to ₹8.4 crore in FY23.
The overall global energy turbine components market is expected to reach ₹282 billion by FY27, the market for aerospace and defence components is expected to rise at a CAGR of 9%. Meanwhile, the market for drill bits could rise at a CAGR of 4%, while the overall market for downhole drilling tools by 4% by FY27 which could benefit the company.
And now, Azad Engineering Limited is coming out with its initial public offer (IPO). The IPO will be an offer for sale as well as a fresh issue. The money raised through the fresh issue will be utilised to repay borrowings, fund capital expenditure and for general corporate purposes. Its shares will be listed on the NSE and the BSE.
Here are key details about the Azad Engineering IPO:
| Company Name | Azad Engineering Limited |
|---|---|
| Company Type | Private |
| Company Established | 1983 |
| Azad Engineering IPO Open Date | 20th December 2023 |
| Azad Engineering IPO Close Date | 22nd December 2023 |
| Azad Engineering IPO Allotment Status | 26th December 2023 |
| Credit of Shares to Demat | 27th December 2023 |
| Azad Engineering IPO Listing Date | 28th December 2023 |
| Azad Engineering IPO Face Value | ₹2 per share |
| Azad Engineering IPO Lot size | 28 shares |
| Azad Engineering IPO Issue Size | Approx ₹740 crore |
| Azad Engineering IPO Listed at | NSE, BSE |
| Azad Engineering IPO Price | ₹499 – ₹524 per share |
Financial snapshot
| ₹ crore | FY21 | FY22 | FY23 |
|---|---|---|---|
| Revenue | 122 | 194 | 251 |
| Net profit | 11.5 | 29.4 | 8.4 |
Strengths
- Operates in an industry with a significant barrier to entry due to a lengthy qualification process and criticality of components.
- Supplies to OEMs with high global market penetration, such as in FY23, it supplied to customers that control approximately 70% of the global gas turbine market.
- Long standing customer relationships with globally preferred partners such as General Electric and Mitsubishi Heavy Industries, with whom it has an average relationship of over 10 years.
- The company has a well-diversified customer base spread across countries such as the USA, Europe, Japan, Middle East, United Kingdom and China outside India.
- Advanced manufacturing facilities with a combined annual installed capacity of 642,310 hours per annum and a capacity utilisation of 90% per annum as of 30 September 2023.
- Employs a skilled workforce of 1,300 personnel as of 30 September 2023.
- Consistent track record of financial performance with EBITDA margins of 22%, 32% and 28% in FY21, FY22 and FY23 respectively.
Risks and threats
- A significant portion of its revenue is derived from its top five customers, accounting for 59%, 54% and 63% of its total revenue from operations in FY21, FY22 and FY23 respectively.
- Exposed to risks related to the global nature of its operations, such as legal and regulatory requirements of different jurisdictions and forex rates.
- Held a total outstanding borrowing of ₹154 crore as of 30 September 2023.
- Subject to strict compliance with quality requirements.
- Subject to the risk of delay or default in payments, the total trade receivables stood at ₹118 crore as of FY23.
- Had negative cash flows from operating activities in FY23 and from investing activities in the last three fiscal years.
You can now apply for the Azad Engineering IPO on Upstox here.