The Rs 1,269-crore IPO consists only of an offer-for-sale with no fresh issue component. The concrete equipment player has fixed the price band in the range of Rs 599 to Rs 629 per share.

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Deven Choksey Research Report

Ajax Engineering Ltd. will launch its initial public offering today and the offer closes for subscription on Feb. 12. The concrete equipment player has fixed the price band in the range of Rs 599 to Rs 629 per share.

The Rs 1,269-crore IPO consists only of an offer-for-sale with no fresh issue component.

The allotment for Ajax Engineering IPO is expected to be finalized on Feb. 13.

The equity shares are proposed to be listed on both the BSE and National Stock Exchange on Feb. 17.

Outlook and Valuation:

Ajax Engineering, with a significant presence in the Self-Loading Concrete Mixer segment, with over 75% of the market share, positioned as a dominant player in the industry.

The company follows a seasonal revenue pattern, the company generates around 35% of its revenue in the first half of the year and nearly 60% in the second half, indicating a strong back-ended business cycle. Ajax Engineering is reasonably priced compared to its industry peers, backed by solid financial performance with revenue/PAT CAGR of 51%/84% from FY22 to FY24.

With its dominant market share, growth trajectory, and favorable industry outlook, the company presents a compelling investment opportunity. Hence, We assign “Subscribe” rating.

Risks:

  • The majority of revenue (85% in FY24) comes from self-loading concrete mixers. Declines in sales or demand for concrete equipment in India could adversely affect the company’s financial and operational performance.

  • The business is subject to seasonal fluctuations, and a decline in sales during specific quarters could adversely affect its financial performance.

  • All assembling and manufacturing facilities are situated in Karnataka, exposing the company to regional risks that could negatively impact its business, operational results, financial health, and cash flows.

  • Nearly all SLCMs are assembled at the Obadenahalli Facility, making up over 96% of production from 2022 to 2024. Any disruptions at this facility could significantly impact operations and financial results.

  • Leases for two key facilities have expired, with pending ownership applications. Uncertainty in acquiring these parcels could adversely affect business operations and financial stability.

  • The company has received modifications in it’s audit report for FY21 & FY22, while the company has taken measures in FY24 for resolving the modifications related to internal controls among other things, future modified opinions by auditor can have an impact on share prices.

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