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Leading construction company with strong parentage

Afcons Infrastructure Ltd. (AIL), the flagship infrastructure, engineering, and construction company of the Shapoorji Pallonji Group, was founded in 1959. AIL’s diverse portfolio includes marine and industrial, surface transport, urban infrastructure, hydro and underground, and oil and gas projects. With a significant international footprint, AIL derives about 30% of its revenue from exports, operating in Asia, Africa, and the Middle East. Over the last 11 years, AIL has completed 79 projects in 17 countries, totalling ?56,305cr. in contract value.

* The Indian construction industry, valued at ?23,978 billion in FY23, is projected to be the world’s fastest-growing construction market. It is expected to grow at a CAGR of ~10% from FY23 to FY28, reaching ?38,508.9 billion by FY28. (Source: Fitch Report).

* As of June 30, 2024, AIL had 65 active projects across 12 countries, with an order book totalling ?31,747cr. The order book to sales ratio for FY24 stood at 2.4x, providing revenue visibility for the next 2 to 3 years. Additionally, as of September 30, 2024, the company was an ‘L1 bidder’ for projects worth ?10,732.36cr.

* For FY24, the company achieved a healthy ROCE (15.3%), ROE (12.5%), EBITDA margins (10.3%), and PAT margins (3.4%) among its peers due to its execution capability.

* AIL’s revenue grew at a 10% CAGR from ?11,019cr in FY22 to ?13,268cr in FY24, while PAT increased to ?449.7cr, reflecting a CAGR of 12% over the FY22-24 period. AIL has a debt-to-equity ratio of 0.9x, which will reduce to 0.6x post-IPO.

* AIL’s current projects include the Kolkata Metro tunnels under the Hooghly River, the Male to Thilafushi Link Project in the Maldives, and a 21 km tunnel for the Mumbai-Ahmedabad high-speed rail corridor, featuring India’s first 7 km undersea rail tunnel.

* AIL secured ?2,967cr through a pre-IPO placement, at a price of Rs463 in line with the IPO, GIPL, the promoter was the seller, through domestic and foreign institutions.

* At the upper price band of ?463, AIL is trading at a P/E ratio of 38x for FY24, which is in line with its peers. With the government’s initiatives aimed at infrastructure development, including increased budgetary allocations and the rapid pace of urbanization, AIL is strategically positioned for substantial growth. Considering its extensive experience in completing high-value and complex projects that offer better margins. Geographical diversification with operations across multiple sectors broadens their revenue base and mitigates risks. With a robust order book and a successful track record of project completion, we assign a “Subscribe” rating for medium- to long-term investment.

Purpose of IPO

The offering comprises a fresh issue of ?1,250cr and an Offer-for-Sale (OFS) of ?4,180cr. The objects include purchase of construction equipment (?80cr),long-term working capital requirements (?320cr), repayment of borrowings (?600cr) and general corporate purposes

Key Risks

AIL depends on projects awarded by government or government-owned customers(70% of order book as of June 30, 2024)

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SEBI Registration Number: INH200000345