The initial public offering (IPO) of Diffusion Engineers Ltd., which opened for public subscription on September 26, 2024, has garnered significant interest from investors, reflected in its robust subscription numbers and a substantial grey market premium (GMP).
Subscription Status
On the first day of bidding, the IPO was fully subscribed, with investors buying 4.72 crore equity shares, which is 7.16 times the offer size of 65.98 lakh equity shares.
As of the second day of bidding, the subscription status has further improved, with the IPO subscribed 9.52 times as of 10:27 a.m. on September 27. Retail investors led the charge, subscribing 14.49 times their allotted quota, followed by non-institutional investors (NIIs) who subscribed 10.17 times their reserved portion. Employees were particularly aggressive, subscribing 20.29 times their reserved portion of 50,000 equity shares.
Grey Market Premium (GMP)
The grey market premium for Diffusion Engineers IPO has been impressive, indicating strong market sentiment. As of September 27, the GMP stood at Rs 90, suggesting a 53.57% gain over the IPO price band of Rs 159-168 per share.
This high GMP reflects investors' optimism about the company's future performance and the potential listing gains. The estimated listing price, based on the GMP, is around Rs 258 per share.
Use of Proceeds
Diffusion Engineers aims to raise Rs 158 crore through this fresh issue, with no offer for sale component. The proceeds will be utilized for several key purposes, including the expansion of the existing manufacturing facility, setting up a new manufacturing facility at Nagpur, Maharashtra, funding working capital requirements, and general corporate purposes.
Business Overview
Founded in 1982, Diffusion Engineers is a Maharashtra-based company engaged in the manufacture of welding consumables, wear plates, and heavy engineering machinery for core industries. The company also provides specialized repairs and reconditioning services for heavy machinery and equipment, and trades in anti-wear powders, welding, and cutting machinery.
In the financial year 2024, the company's consolidated revenue from operations increased by 10% year-on-year to Rs 285 crore, while the net profit rose by 39% to Rs 30.8 crore.
Issue Details
- **Issue Period:** September 26 to September 30, 2024
- **Price Band:** Rs 159-168 per share
- **Listing Date:** October 4, 2024, on BSE and NSE
- **Minimum Lot Size:** 88 shares
- **Employee Reservation:** Up to 50,000 shares at a discount of Rs 8 per share to the final issue price
Analyst Recommendations
Several analysts have recommended subscribing to the IPO, citing the company's strong growth prospects, expanding international footprint, and reasonable valuations. Master Capital Service Ltd. and SIMFS have both suggested that the IPO is a good long-term investment opportunity, given the company's plans for geographical expansion and diversification of its product offerings.
Risk Factors
While the IPO has seen strong interest, potential investors should also consider the risk factors. These include the company's dependence on the domestic market, negative cash flows in certain fiscal years, and the working capital-intensive nature of its business.
In conclusion, the Diffusion Engineers Ltd. IPO has attracted significant attention with its strong subscription numbers and high grey market premium. As the issue closes on September 30, 2024, and prepares for listing on October 4, 2024, investors are keenly watching the developments, hoping for substantial listing gains.
