Backed by strong financials, market leadership in concrete equipment, and India’s booming infrastructure sector
The initial public offering (IPO) of Ajax Engineering, a prominent manufacturer in the concrete equipment sector, has garnered significant attention in the financial markets. With the subscription window open from February 10 to 12, 2025, potential investors are evaluating the merits of this offering. This article delves into the company’s background, financial performance, IPO specifics, and expert analyses to provide a comprehensive perspective on whether subscribing to the Ajax Engineering IPO is a prudent decision.
Company Overview
Established over three decades ago, Ajax Engineering has solidified its position as a leader in the concrete equipment industry. The company’s extensive product portfolio encompasses self-loading concrete mixers (SLCMs), batching plants, transit mixers, and various types of concrete pumps, including boom pumps and self-propelled boom pumps. Additionally, Ajax offers slipform pavers and 3D concrete printers, catering to the entire concrete application value chain. As of September 30, 2024, the company boasts over 141 equipment variants, underscoring its commitment to innovation and comprehensive market coverage.
Financial Performance
Ajax Engineering has demonstrated robust financial growth in recent years. The company’s revenue surged from ₹763 crore in FY22 to ₹1,741 crore in FY24, reflecting a compound annual growth rate (CAGR) of approximately 51%. Correspondingly, the profit after tax (PAT) increased from ₹135.9 crore in FY23 to ₹225.15 crore in FY24, indicating a significant enhancement in profitability. This upward trajectory in both revenue and profit underscores the company’s strong market position and operational efficiency.
IPO Details
The Ajax Engineering IPO is entirely an offer-for-sale (OFS), comprising 2.01 crore equity shares. The price band has been set between ₹599 and ₹629 per share, valuing the total issue at around ₹1,269 crore at the upper end. Notably, since the IPO is solely an OFS, the company will not receive any proceeds from the sale; instead, the funds will be directed to the selling shareholders. The market capitalization of Ajax Engineering is estimated at ₹7,200 crore at the upper price band.
Subscription Status and Investor Response
As of the second day of the IPO, the issue has been subscribed 36%, with the retail investor portion receiving 41% subscription, non-institutional investors (NIIs) at 39%, and qualified institutional buyers (QIBs) at 26%. The employee segment has seen a subscription of 85%. The subscription figures indicate a moderate level of interest from various investor categories, reflecting a cautious yet positive sentiment towards the offering.
Grey Market Premium (GMP) Insights
In the grey market, Ajax Engineering’s shares are trading at a premium of ₹16, suggesting a potential listing price of ₹645 per share. This represents a modest premium of approximately 2.54% over the upper end of the IPO price band. While GMP can offer insights into market sentiment, it is essential to approach these figures with caution, as they are speculative and can fluctuate based on market dynamics.
Brokerage Reviews and Recommendations
Several brokerage firms have provided their analyses of the Ajax Engineering IPO:
Anand Rathi Research highlights the company’s leadership in the SLCM segment, comprehensive product range, and stable financial performance. The firm notes that the IPO is reasonably priced, with a post-issue market capitalization of ₹7,196 crore and a price-to-earnings (P/E) ratio of 32 times based on FY24 earnings. They recommend subscribing for the long term, citing the company’s strong market position and growth prospects.
Canara Bank Securities emphasizes Ajax Engineering’s alignment with India’s infrastructure growth trajectory, robust financials, and moderate valuation. They suggest that the IPO presents opportunities for both listing gains and long-term investment, given the company’s fundamentals and market positioning.
Geojit Financial Services points to Ajax’s dominant market share, favorable industry outlook, and extensive dealer network as key strengths. They recommend subscribing on a long-term basis, considering the company’s compelling investment proposition.
Industry Outlook
The concrete equipment market in India is experiencing significant growth, driven by increased mechanization and substantial investments in infrastructure, housing, and renewable energy projects. As of FY24, approximately 25% of the concrete used in India is processed through mechanized equipment, up from 16% in FY19. This trend indicates a shift towards more efficient construction practices, which bodes well for companies like Ajax Engineering that offer a diverse range of concrete equipment solutions.
Risk Factors
Potential investors should be mindful of certain risks associated with the company:
Geographical Concentration: All of Ajax Engineering’s manufacturing facilities are located in Karnataka, which could expose the company to regional risks, such as natural disasters or political instability, potentially impacting operations and financial performance.
Growth Sustainability: The company has experienced rapid growth in recent years. Maintaining this momentum may pose challenges, and any failure to effectively manage expansion or execute growth strategies could adversely affect business outcomes.
Ajax Engineering presents a compelling case for investment, given its strong financial performance, market leadership, and favorable industry dynamics. The company’s comprehensive product portfolio and extensive dealer network further enhance its growth prospects. While the IPO is entirely an offer-for-sale, and thus the company will not receive direct proceeds, the selling shareholders’ confidence in divesting their holdings may reflect positively on the company’s valuation.
Considering the moderate grey market premium and positive brokerage reviews, the Ajax Engineering IPO appears to be a promising opportunity for investors seeking exposure to India’s burgeoning infrastructure and construction sectors. However, it is crucial to assess individual risk tolerance and investment objectives before making a decision.
