Diffusion Engineers IPO, a heavy welding consumables business, is receiving great focus on the debut issue of its initial public offering. The IPO issue of the company has been oversubscribed by more than seven times on the very first day of opening. The IPO was opened for subscription from Thursday, 26 September 2024 and remains open till 30 September 2024.
The Nagpur-based diffusion engineers company will be raising ₹158 crore through its IPO and that will be done through fresh shares issuance to the public. A rich participation from the retail investors, non-institutional investors and a small participation from the qualified institutional buyers does indicate the potential and very much an attractive profile of the company in the current scenario.
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Diffusion Engineers IPO : Structure and Investor Segments
Diffusion Engineers has structured its IPO to suit all classes of investors. The company’s stocks have been categorized into different dimensions, as below:
QIB: In this issue, 20% of the equity shares are reserved for QIBs, covering all organizations like mutual fund, foreign institutional investors, and insurance companies. These kinds of investors generally look for stable long-term prospects and may be quite selective in choosing investments.
NIIs: In this issue, 15% of equity shares are to be allocated to NIIs, comprising corporate entities as well as high net worth individuals.
Retail Investors: The issue has been kept at 35% for retail investors, who have been the most interested in the offer. Therefore, the Diffusion Engineers IPO was subscribed 11.24 times by its retail investors.
Anchor Investors: In addition to this, 50% of the shares were provided to anchor investors. Anchor investors are the investors who invest a huge amount in an IPO before it throws open its gates to common public and, thereby, gives the offer a stamp of credibility and confidence.
IPO Subscription Status
The subscription status on the last day of the IPO, September 30, portrayed a picture of strong demand. Diffusion Engineers IPO was oversubscribed 7.16 times, indicating that demand is definitely much more than the number of available shares. The retail investors led the charge with 11.24 times subscription to the allocated shares to them.
That means non-institutional investors availed 6.80 times; this suggests huge appetite from more well-to-do investors and the business community in general. Qualified institutional buyers, on the other hand, responded somewhat lowly: their segment was booked at 0.03%. Maybe this number will go up while the IPO closes.
BSE data found that IPO witnessed great demands at 4,72,31,624 applications against 65,98,500 shares offered. It shows participation from all corners.
Diffusion Engineers IPO Grey Market Premium (GMP)
Grey market premium of an IPO is an indicator of how the market views the company’s stock even before it’s listed on the stock exchanges. According to market analysts, shares of Diffusion Engineers have fetched a grey market premium of ₹90 per share. That is a 53.57 per cent premium over its issue price of ₹168 per share.
In this grey market, the premium at this level implies that the market is optimistic about its future and that many traders expect the stock to perform well post-listing. Investors are willing to pay a price to acquire the share; this clearly shows demand at a high level.
Details of IPO for Diffusion Engineers:
Book-built IPO of Diffusion Engineers raises ₹158 crore The issue is all fresh, with no existing shareholders selling their equity shares; the amount raised will directly go into the company.
The company has set a price band of ₹ 159-₹ 168 per share, for which lot bids on shares will be entertained. Lot size has been made of 88 shares, which will enable the retail investors to make bids in manageable quantities.
Unistone Capital would serve the task of managing the issue as lead manager to the IPO. Moreover, the IPO has held shares of up to 50,000 shares to be issued to the employees of the company who would buy shares at a discount of ₹8 per share.
Timeline to Diffusion Engineers IPO
The allotment for Diffusion Engineers IPO is expected to arrive on October 1, 2024. This is the day when the company would declare which investor has received shares and how much, in comparison to his or her bid placed for the issuance, among others. Post allotment, the company is seen making its debut into the stock market with a listing scheduled on both BSE and NSE on Friday, October 4, 2024.
About Diffusion Engineers Ltd
Diffusion Engineers Ltd has long become a major player in welding consumables and heavy machinery component manufacturing, which are essentially manufactured for the core industries like heavy engineering, mining, and cement. The company is well known for products like wear plates, wear parts, and welding consumables, that were much needed for industries which require robust machineries and tools.
Along with manufacturing, Diffusion Engineers provides solutions in the repair and reconditioning of heavy machinery. The company has long proven its capability in this service offering. Notably, business clients who have sought cost-effective solutions to extend the life and efficiency of their machinery found these service offerings particularly attractive.
Financial Performance
The company has demonstrated stable financial growth with 10% revenue between the financial years 2023 and 2024. In the same period, the PAT of Diffusion Engineers had grown by a satisfactory 39%, an indication that not only had the company gained in terms of sales but also in profitability. Such financial growth catches the eye of investors.
Besides core business, Diffusion Engineers trades wear protection powders and welding and cutting machines. Therefore, it has a diversified source of income besides core business. Major services provided by company are super conditioning process-a surface treatment resulting in increased wear resistance, production cost savings, and increased lifetimes of critical machine components.
Growth in the industry and strategic plans for expansion:
The Indian heavy engineering capital goods market happens to be a gargantuan one, estimated at ₹3,100-3,200 billion in fiscal 2024. Its growth has been forecasted at 7.5-8.5% CAGR from FY 2023 to FY 2027 which would take the market size up to ₹3,800-3,900 billion. This is where companies like Diffusion Engineers are quite literally in a perfect position to cash in on the expanded market.
This company has stated several strategic moves to ensure its position in the market within this expanding market. For example, it intends to expand into manufacturing nickel, cobalt, and iron-based powders, expanding the company’s portfolio of welding consumables. As such, it will not only introduce diversification of various products but also improve its capabilities to cater to the demands of the growing industry for special materials.
Besides, Diffusion Engineers plans to expand its geographical markets through an increase in exports through subsidiaries and joint ventures. This will allow the company to penetrate other markets, especially growing ones, concerning demand for welding consumables and components of heavy machinery.
The company is also diversifying its anti-wear solutions and penetrating new industries, such as energy and infrastructure, by providing customized solutions to the needs of those industries.
IPO Review of Diffusion Engineers-An Investment Bet for the Medium to Long Term
Brokerages have been largely upbeat regarding the Diffusion Engineers IPO, viewing this as a medium-to long-term play. Domestically brokerage Master Capital Service Ltd has indicated that the overall growth prospects in India’s heavy engineering industry are high and the company is well-positioned to capitalize on it being a positive environment.
Given its strong financial base, strategic growth plans, and a clean emphasis on product diversification, Diffusion Engineers is well-structured for stable growth over the years to come. Investors seeking exposure into the heavy engineering and welding consumables sectors may find an interesting investment proposition in the IPO to be floated shortly, considering growth prospects from such sectors in the immediate future.
Now, going by the trend already seen among retail and non-institutional investors in the form of subscription levels and grey market activity, it has already become evident that Diffusion Engineers IPO has evoked a good response. The listing date is just about to come, and then all eyes will be glued to the company to know how it fares on the stock exchanges, but early signs seem to be promising for this heavy industry player from Nagpur.