Ajax Engineering IPO analysis

Ajax Engineering IPO (initial public offering) will open for subscription on February 10, 2025, and close on February 12, 2025. We break down the concrete equipment manufacturer's strengths, weaknesses and growth prospects to help investors make an informed decision. Ajax Engineering IPO in a nutshell Quality : Between FY22 and FY24, the company reported a three-year average ROE and ROCE of nearly 20 and 27 per cent, respectively. Growth : Between FY22 and FY24, its revenue and profit after tax grew by 51 and almost 132 per cent per annum, respectively. Valuation : At the upper end of the price band, the stock is valued at a P/E and a P/B ratio of nearly 29.6 and 7.2 times, respectively. Overview: India's booming infrastructure sector, urban expansion and rising adoption of mechanised construction provide a favourable growth runway for Ajax Engineering. Additionally, government-led infrastructure push, automation trends and export growth offer further opportunities. However, intense competition in the industry makes differentiation critical for sustaining a strong market position. About Ajax Engineering Incorporated in 1992, Ajax Engineering is a leading manufacturer and supplier of concreting equipment, specialising in self-loading concrete mixers (SLCMs). With 93.4 per cent of sales from India, Ajax also has a growing presence in South and Southeast Asia, the Middle East and Africa. SLCMs are the company's core revenue driver, contributing 85 per cent of FY24 revenue and 81.5 per cent for the six months ending September 30, 2024. Ajax commanded a 77 per cent market share in SLCM sales during H1 FY25. Non-SLCM equipment accounted for 10 per cent of H1 FY25 revenue. Spare parts and services contribute 7.5 per cent and 1 per cent of the revenue, respectively, for the six months ending September 30, 2024. Strengths of Ajax Engineering Extensive dealership network: Ajax operates through 51 dealerships across 23 states in India and 25 international dealers, collectively driving 93 per cent of total sales. This has helped the company grow its customer base by 19 per cent annually during FY22-24 while maintaining its industry leadership in SLCMs. Focus on R&D: Ajax Engineering's expenditure on research and development (R&D), as a percentage of its revenue from operations, has been consistently around 1 per cent during FY22-24. As of September 30, 2024, it holds two patents related to product design and functionality, along with four trademarks protecting its proprietary intellectual property, primarily in the SLCM segment. Weaknesses of Ajax Engineering Promoter non-compliance: A member of the promoter group, David Hansen, has refused to be included in SEBI-mandated disclosures and has not provided necessary information and confirmations regarding his interests. Additionally, past delays in regulatory filings for bonus issues reflect poorly on the management. Cyclical industry: Ajax Engineering's growth is closely tied to government and private infrastructure spending, making its revenue volatile and vulnerable to industry cycles. Ajax Engineering IPO details Total IPO size (Rs cr) 1,269 Offer for sale (Rs cr) 1,269 Fresh issue (Rs cr) - Price band (Rs) 599-629 Subscription dates Feb 10 to Feb 12 2025 Purpose of issue Offer for Sale Post-IPO M-cap (Rs cr) 7,196 Net worth (Rs cr) 996 Promoter holding (%) 82.4 Price-to-earnings ratio (P/E) 29.6