Concrete Dreams or Cracking Pavement? Analyzing the Ajax Engineering IPO Hype

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The Ajax Engineering IPO has officially opened for subscription today, February 10, 2025, aiming to raise ₹1,269 crore.

With a price band of ₹599 to ₹629 per share, the IPO is generating considerable buzz, but is this hype justified, or could investors be walking onto cracking pavement? Let’s delve deeper into the offering.

The Offer and Its Structure

Unlike many IPOs that involve a fresh issue of shares, the Ajax Engineering IPO is entirely an offer for sale (OFS) of 2.02 crore shares. This means the company itself won’t receive any of the proceeds; instead, the money will go to the promoters and existing investors who are divesting their holdings.

Those participating in the OFS include promoters as well as investor Kedaara Capital Fund II LLP.

Financials and Market Position

Ajax Engineering is a concrete equipment manufacturer with a comprehensive range of related equipment, services, and solutions across the concrete application value chain.

The company operates four assembling and manufacturing facilities in Karnataka, with another expected to be operational in August 2025.

In FY24, Ajax Engineering reported revenue from operations at ₹1,741 crore with a profit after tax (PAT) of ₹225 crore.

One brokerage firm has assigned a “Subscribe” rating to the IPO, citing reasonable pricing compared to industry peers and solid financial performance with a Revenue/PAT CAGR of 51%/84% from FY22 to FY24.

They highlight the company’s dominant market share and growth trajectory as compelling investment opportunities.

The Grey Market Buzz

Ahead of the IPO opening, the grey market premium (GMP) for Ajax Engineering shares stood at ₹52, suggesting a premium of over 8.27% over the issue price. One analyst anticipates the shares will list at ₹681 on the BSE and NSE.

It’s important to remember that GMP is speculative and not an official price quote.

Points to Consider

• Offer for Sale: The fact that the IPO is entirely an OFS means the company won’t directly benefit from the funds raised. Investors should consider why existing shareholders are choosing to divest at this time.
• Valuation: While one firm deems the IPO reasonably priced, investors should conduct their own due diligence to determine if the valuation aligns with their investment goals.
• GMP Speculation: The grey market premium can be an indicator of investor sentiment, but it shouldn’t be the sole basis for investment decisions.
• Anchor Investors: Ajax Engineering has already raised ₹379.32 crore from anchor investors.

The Final Verdict

The Ajax Engineering IPO presents a mixed bag. The company operates in a sector with growth potential, as suggested by the positive reviews, and has demonstrated strong financial performance.

However, the OFS structure and reliance on continued infrastructure development require careful consideration.

As always, prospective investors should analyze their own risk tolerance, conduct thorough research, and consult with financial advisors before making any investment decisions.

The IPO closes on February 12, 2025, leaving a narrow window for potential investors to weigh their options.

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