IPO Size: Rs. 1,269 cr, Entirely Offer for Sale (OFS)

• 63% of OFS by promoter (93.5% holding to shrink to 82.4% post IPO)
• 37% of OFS by investor Kedaara (completely exiting 6.5% stake at 13% IRR in 5.5 years)

Price band: Rs.599-629 per share

M cap: Rs. 7,196 cr, implying 18% dilution

IPO Date: Mon 10^th Feb to Wed 12^th Feb 2025, Listing Mon 17^th Feb 2025

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Concrete Equipment OEM

Ajax Engineering is a 32 year old, Bengaluru based original equipment manufacturer (OEM), of self-loading concrete mixers (SLCM), batching plants for concrete production and transit mixers for concrete transportation, commanding 75% market share, in terms of number of SLCM sold. It has a pan India network of 51 dealers.

New Energy Norms

The construction equipment vehicles (CEV) industry is currently undergoing the second round of energy transition (1^st transition in 2021), wherein CEV Stage V norms will kick in - last date for production by OEM was 31.12.24 and last date of sale is 30.6.25. Thus, Ajax has produced excess, in anticipation, which is supported by higher finished goods inventory in Sep 24 - inventory as of 30.9.24 nearly doubled YoY to Rs. 561 cr.

Mid-Teen Margins

FY24 revenue stood at Rs. 1,741 cr, with 16% EBITDA and 13% net margin, due to a low break-even, leading to high operating leverage. H1FY25 revenue rose 12% YoY to Rs. 770 cr ,with EBITDA up 19% YoY to Rs. 119 cr and PAT up 22% YoY to Rs. 101 cr, translating into a net margin of 13% and an EPS of Rs. 8.8. Due to seasonality in construction industry, H1 accounts for 35-40% of annual performance.

Company is debt free with Rs. 400 cr surplus cash (Rs. 36 per share) on net worth of Rs. 1,000 cr.

Good Pricing

Based on FY25E EPS of around Rs. 23, shares are priced at a PE multiple of around 27x on current year earnings, which is attractive for 24.5% RoE, double digit margin, and lower than CEV OEM peer Action Construction’s PE of 35x.

While there is cyclicity in business, Budget’s 10.1% YoY higher allocation for capital spending at Rs. 11.2 lakh cr for FY26E keeps outlook positive. Infrastructure creation, with focus on roads, railways, metro, smart cities, acts as a tailwind for demand for company’s products.