The Diffusion Engineers IPO is set to open for bidding from September 26 to September 30, 2024, aiming to raise a total of ₹158.00 crore. The company specializes in manufacturing welding consumables and wear plates, serving various industries.
About Diffusion Engineers
Founded in 1982, Diffusion Engineers specializes in manufacturing:
- Welding Consumables: Including special-purpose electrodes and flux-cored wires.
- Wear Plates and Parts: Products designed to resist wear and prolong equipment life.
- Heavy Engineering Machinery: Machinery crucial for various industries.
- Repair Services: Offering reconditioning services for heavy machinery and equipment.
The company also trades in anti-wear powders and welding and cutting machinery, with a wide array of products that include:
- Cold repair compounds
- Grizzly bars
- Coal nozzle tips
- Wear liners and chutes
- Hard face pipes
- Thermal spray powders
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Strengths of Diffusion Engineers
- Forward Integration: The company has developed a forward integration system, enabling the in-house manufacturing of essential products.
- Manufacturing Facilities: With four manufacturing units in Nagpur, Maharashtra, each equipped for comprehensive manufacturing processes, the company maintains quality control and product storage efficiently.
- Quality Certifications: Diffusion Engineers holds various certifications:
- ISO 9001:2015 for quality management
- ISO 45001:2018 for occupational health and safety
- ISO 14001:2015 for environmental management
- International Presence: The company operates subsidiaries in Singapore, Turkey, and the Philippines, with joint ventures in the UK and Malaysia.
- Consistent Revenue Growth: The company has shown a steady increase in revenue and profit over the years:
| Fiscal Year | Revenue (₹ Cr) | Profit After Tax (PAT) (₹ Cr) |
|---|---|---|
| FY22 | 204.59 | 17.05 |
| FY23 | 254.88 | 22.14 |
| FY24 | 278.14 | 30.80 |
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Risks and Challenges
While Diffusion Engineers exhibits strong performance metrics, several risks may affect its operations:
- Domestic Market Reliance: A significant portion of revenue comes from the domestic market, making it vulnerable to economic changes in India.
- Concentration of Manufacturing: With all manufacturing facilities located in Nagpur, any adverse events in the region could disrupt operations.
- Dependency on Key Industries: The company’s revenue is heavily reliant on sectors such as cement, engineering, power, steel, and sugar. A downturn in these industries could significantly impact financial stability.
- Customer Concentration: The top 10 customers contributed around 29.43% of revenue in FY24. The loss of any major clients could adversely affect profitability.
- Litigation Risks: The company and its directors are involved in outstanding litigation, which could impact business prospects if unfavorable judgments occur.
- Indebtedness: As of July 31, 2024, the company had total debts of ₹41.80 crore, and any difficulties in servicing these loans could hurt its financial standing.
Financial Overview
Here’s a snapshot of Diffusion Engineers’ financial performance over the last three years:
| Metric | FY22 (₹ Cr) | FY23 (₹ Cr) | FY24 (₹ Cr) |
|---|---|---|---|
| Revenue | 204.59 | 254.88 | 278.14 |
| Total Assets | 190.00 | 230.00 | 276.00 |
| Profit | 17.05 | 22.14 | 30.80 |
Application Details for Diffusion Engineers IPO
The IPO is available within a price range of ₹159 to ₹168 per share. The minimum lot size is 88 shares, which translates to a minimum investment of ₹13,992 for retail investors.
| Application Type | Price Band | Apply Upto |
|---|---|---|
| Regular | ₹159 – ₹168 | ₹2 Lakh |
| Employee | ₹151 – ₹160 | ₹2 Lakh |
| High Networth Individual (HNI) | ₹159 – ₹168 | ₹2 – 5 Lakh |
IPO Details
| IPO Date | September 26, 2024 – September 30, 2024 |
|---|---|
| Face Value | ₹10 per share |
| Price Band | ₹159 to ₹168 per share |
| Lot Size | 88 Shares |
| Total Issue Size | 9,405,000 shares (₹158.00 Cr) |
| Fresh Issue | 9,405,000 shares (₹158.00 Cr) |
| Issue Type | Book Built Issue IPO |
| Listing At | BSE, NSE |
Diffusion Engineers IPO Lot Size
| Application | Lots | Shares | Amount |
|---|---|---|---|
| Retail (Min) | 1 | 88 | ₹14,784 |
| Retail (Max) | 13 | 1,144 | ₹192,192 |
| S-HNI (Min) | 14 | 1,232 | ₹206,976 |
| B-HNI (Min) | 68 | 5,984 | ₹1,005,312 |
Promoter Holdings
The promoters of the company include Mr. Prashant Garg, Dr. Nitin Garg, and Ms. Chitra Garg. Their holdings are as follows:
| Pre-Issue | Post-Issue |
|---|---|
| 93.10% | 69.70% |
Key Performance Indicators (KPI)
| Metric | Value |
|---|---|
| Market Capitalization | ₹628.76 Cr |
| Return on Equity (ROE) | 18.52% |
| Return on Capital Employed (ROCE) | 20.63% |
| Debt/Equity Ratio | 0.18 |
| Return on Net Worth (RoNW) | 18.52% |
| Price-to-Book Value (P/BV) | 2.47 |
| PAT Margin | 10.79% |
Objectives of the IPO
The funds raised from the IPO are planned to be used for:
- Capital Expenditure: Expanding the existing manufacturing facility in Nagpur.
- New Manufacturing Facility: Establishing a new site in Nagpur to enhance production capacity.
- Working Capital: Supporting ongoing operational expenses.
- General Corporate Purposes: Covering various corporate needs.
Analyst Review
According to Dilip Davda, Diffusion Engineers operates in a vital sector of manufacturing welding consumables and heavy machinery, showing consistent growth in both revenue and profits. Although the issue appears fully priced based on FY24 earnings, the company is well-positioned for growth amidst increasing industrial spending. Therefore, investors may consider allocating funds for medium to long-term investment.
Contact Information
For further inquiries, investors can reach out to the IPO registrar:
Bigshare Services Pvt Ltd
Phone: +91-22-6263 8200
Email: ipo@bigshareonline.com
Website: Bigshare IPO Status
Conclusion
The Diffusion Engineers IPO presents a compelling opportunity for investors interested in the manufacturing sector. With its established market presence and growth trajectory, the company could be a valuable addition to an investment portfolio. However, potential investors should carefully consider the associated risks before making investment decisions.
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