Diffusion Engineers Limited, a company with over four decades of experience, has opened its IPO subscription from September 26 to September 30, 2024. The company aims to raise ₹158 Crores through a Book Built Issue, consisting entirely of a Fresh Issue of 94.05 Lakh Shares. Investors are keen on this IPO due to its long-standing reputation in the engineering solutions sector, providing products and services such as special welding consumables, wear plates, and heavy engineering equipment.

Business Overview:

The company's operations span both domestic and international markets, delivering innovative engineering solutions to core industries, with a particular emphasis on customized repair and reconditioning services for heavy machinery and equipment. Their diverse range of services has positioned Diffusion Engineers as a leader in the market.

IPO Details:

Subscription Period: September 26 to September 30, 2024

Issue Size: ₹158 Crores

Fresh Issue: 94.05 lakh shares

Price Band: ₹159 to ₹168 per share

Lot Size: 88 shares for retail investors (₹14,784 minimum investment), 14 lots for HNIs (₹2,06,976)

Allotment Date: Expected by October 1, 2024

Listing Date: Tentatively October 4, 2024, on both NSE and BSE.

Leadership and Management:

Diffusion Engineers is led by an experienced team:

Prashant Garg, Chairman & Managing Director, with 20 years of experience, drives the company’s vision and growth. His annual salary stands at ₹24 million.

The board also includes Non-Executive Director Dr. Nitin Garg, a neurosurgeon; Chitra Garg, with extensive corporate governance expertise; Anil Trigunayat, former ambassador; Sherry Oommen, a legal and taxation expert; and Deepali Bendre, an experienced Chartered Accountant. Their combined expertise ensures strong corporate governance and strategic direction for the company.

Financial Performance:

Diffusion Engineers has displayed steady financial growth over recent years. In Fiscal 2024, the company’s revenue reached ₹2855.61 million, marking a rise from ₹2586.72 million in FY23 and ₹2087.47 million in FY22. The company's EBITDA grew significantly to ₹462.84 million in FY24, up from ₹316.73 million in FY23 and ₹266.46 million in FY22.

The Profit After Tax (PAT) also increased, reaching ₹308.03 million in FY24, compared to ₹221.45 million in FY23 and ₹170.46 million in FY22. This demonstrates sustained profitability and solid financial health.

IPO Valuation:

The company is issuing shares at a pre-issue EPS of ₹10.94 and a post-issue EPS of ₹8.23. The pre-issue P/E ratio is 15.35x, and the post-issue P/E ratio is 20.41x, compared to the industry average P/E of 33.9x.

Diffusion Engineers has a Return on Capital Employed (ROCE) of 20.63% and a Return on Equity (ROE) of 18.52% for FY24, indicating a well-balanced use of capital and solid profitability. These metrics suggest that the IPO is fairly priced, offering potential for both listing gains and long-term investment value.

Objectives of the IPO:

The proceeds from the Fresh Issue will be allocated as follows:

₹713.80 Million will be used for capital expenditure requirements for the proposed expansion of their existing manufacturing facility.

₹303.85 Million will be directed towards setting up a new manufacturing facility in Hingna, Sonegaon District, Nagpur, Maharashtra.

₹220.00 Million is earmarked for working capital requirements.

The remaining amount will be utilized for general corporate purposes.

Grey Market Premium (GMP):

The Grey Market Premium (GMP) for Diffusion Engineers Limited IPO stands at ₹62, reflecting potential listing gains of 37%. While GMP offers insight into market sentiment, it should be noted that these figures are based on informal trading in the unregulated Grey Market, and actual price discovery occurs only after the shares are listed on the stock exchange.

How to Check IPO Allotment Status:

Allotment Date: October 1, 2024. To check the IPO allotment status:

Visit the IPO allotment status page on the registrar’s website (Bigshare Services Private Limited).

Select Diffusion Engineers Limited IPO from the dropdown.

Enter your application number, PAN, or DP Client ID.

Submit the details to view the allotment status.

Industry Position and Outlook:

Diffusion Engineers operates in a niche but highly essential sector, providing critical components and services to heavy industries. Their special welding consumables and repair solutions cater to core sectors such as manufacturing, construction, and infrastructure, industries that are fundamental to both domestic and global economies. With a strong reputation for quality and innovation, the company is well-positioned for continued growth, especially with the planned expansion of its facilities in Nagpur.

Conclusion:

The Diffusion Engineers Limited IPO presents an appealing investment opportunity, driven by the company’s strong financial performance and its leadership in the engineering solutions industry. The 37% potential listing gains, as indicated by the GMP, add further attractiveness for investors looking for short-term returns, while the company’s expansion plans and consistent growth make it a sound long-term investment option as well.

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