Afcons Infrastructure Limited IPO Review | CA Rachana Ranade

Summary

This video provides an insightful overview of Afcon Infrastructure Limited, a leading engineering and construction firm specializing in complex EPC projects. Highlighting notable achievements like the CH Bridge and Atal Tunnel, the presenter details the company's operations across five key verticals, including marine, urban infrastructure, and oil and gas. Financially, Afcon showcases a strong order book, though concerns arise over its low PAT margin and reliance on government contracts. The video concludes by encouraging viewers to invest in knowledge and remain informed about the opportunities within India's growing infrastructure sector.

Takeaways

• 😀 Afcon Infrastructure Limited is an engineering and construction company known for executing complex EPC projects.
• 🏗️ EPC stands for Engineering, Procurement, and Construction, which is crucial in the planning and execution of infrastructure projects.
• 🌉 Notable projects completed by Afcon include the tallest single-arch railway bridge in the world and the Atal Tunnel, the longest high-altitude tunnel globally.
• 🌍 Afcon has successfully completed 79 projects in 17 countries, with a total contract value of approximately ₹5635 billion.
• 📈 The company has an impressive ongoing project tally of 65, indicating a strong order book of ₹317 billion.
• 🚧 Afcon operates in five verticals: marine and industrial, surface transport, urban infrastructure, hydro, and underground construction.
• 💡 The construction sector's GVA (Gross Value Added) is projected to grow significantly from ₹7.8 trillion in 2012 to ₹14.4 trillion by 2024.
• 📊 Financially, Afcon's revenue grew at a CAGR of 9.72%, while its profit after tax (PAT) saw a growth of 12%.
• ⚖️ The company faces risks, including significant litigations amounting to ₹50,000 million, which is 11 times their annual profit.
• 🎉 The IPO offering opens on October 25th and closes on October 29th, with funds primarily allocated for loan repayment and working capital.

Q & A

What type of projects does Afcon Infrastructure Limited primarily undertake?

Afcon Infrastructure Limited primarily undertakes Engineering, Procurement, and Construction (EPC) projects, including complex infrastructure projects like highways, metro systems, and tunnels.

Can you name some notable projects completed by Afcon?

Notable projects completed by Afcon include the Samdi Mahamar highway project in Maharashtra, the CH Bridge (the tallest single-arch railway bridge in the world), and the Atal Tunnel (the longest high-altitude tunnel globally).

What is the current status of Afcon's ongoing projects?

Afcon currently has 65 ongoing projects and a total aggregate order book of ₹317 billion, indicating robust future work.

How much has the construction GVA in India grown from 2012 to 2024?

The construction Gross Value Added (GVA) in India has grown from ₹7.8 trillion to ₹14.4 trillion, reflecting nearly a 99.9% increase over that period.

What financial metrics indicate Afcon's recent performance?

Afcon's revenue from operations increased from ₹110 billion to ₹132 billion (CAGR of 9.72%), while their profit after tax (PAT) grew from ₹3,576 million to ₹4,497 million (CAGR of 12%).

What is a potential concern regarding Afcon's profitability?

A potential concern for Afcon's profitability is their low PAT margin of 3.3%, which can be affected by cost overruns in their long-duration projects.

How does Afcon's PE ratio compare to the industry average?

Afcon's Price-to-Earnings (PE) ratio is 35.075, which is lower than the industry average of 47.91, suggesting that the company's shares may be undervalued relative to its peers.

What are the primary risks facing Afcon Infrastructure Limited?

Primary risks include significant litigation claims totaling ₹50 billion, a high dependency on government contracts (about 70% of revenue), and exposure to fluctuations in raw material costs.

What is the main focus of the company's upcoming IPO?

The main focus of Afcon's upcoming IPO is to raise funds for repaying costly loans, long-term working capital requirements, and purchasing construction equipment.

What advice does the presenter give regarding scams using AI and deepfake technology?

The presenter advises viewers to be cautious of scams and only trust ads posted from their verified account with a blue tick, emphasizing that they will never solicit WhatsApp group memberships for stock tips.