Diffusion Engineers IPO Receives Strong Interest, Surges in Grey Market

The initial public offering (IPO) of Diffusion Engineers is receiving significant attention as it reaches its final subscription day on Monday, September 30, 2024. The IPO, which commenced on September 26, is witnessing high demand in the grey market, where shares are trading at a premium of Rs 58 over the upper price band of Rs 168, marking a 34.52% increase.

According to grey market observers, unlisted shares reflect strong interest from investors. As of 10:27 AM on Monday, bids for the IPO reached 24,42,32,032 shares against the 65,98,500 shares offered, translating to an oversubscription of 37.01 times. This data was provided by the National Stock Exchange (NSE). Non-Institutional Investors (NIIs) showed the most interest, subscribing 72.15 times, followed by Retail Individual Investors (RIIs) at 42.69 times and Qualified Institutional Buyers (QIBs) at 0.44 times.

The IPO is priced between Rs 159 and Rs 168 per share with a lot size of 88 shares. Retail investors need a minimum investment of Rs 14,784 to bid for one lot. The basis of share allotment is scheduled for October 1, 2024, with shares expected to be credited to demat accounts on October 3 and listed on the Bombay Stock Exchange (BSE) and NSE on October 4.

Diffusion Engineers intends to utilize the funds raised from the IPO for capital expenditure, establishing a new manufacturing facility, and general corporate purposes. Unistone Capital is the sole book-running lead manager, and Bigshare Services is the registrar for the public issue.

In terms of IPO performance analytics, brokerages such as Swastika Investmart and Anand Rathi Research have recommended subscribing, citing the company’s consistent financial growth. Diffusion Engineers recorded growth rates of 21% in operating income and 38% in profit after tax between FY21 and FY24.

Listed peers of Diffusion Engineers include Ador Welding Ltd and AIA Engineering Ltd. According to the red herring prospectus, Diffusion Engineers shows a price-to-earnings (P/E) ratio of 15.36x, well below the industry average of 32.86x, suggesting that the IPO is favorably valued.

The company, which has been providing engineering solutions for over four decades, specializes in manufacturing products such as welding consumables, wear plates, and heavy engineering equipment. The capital from the IPO is earmarked for expanding its current manufacturing capabilities and for the construction of a new facility in Maharashtra.

The market enthusiasm has been equally reflected in the grey market premium, where Diffusion Engineers’ shares are expected to list at Rs 226, about 34.52% higher than the offer price. Investors are advised to weigh potential benefits of listing profits alongside long-term value appreciation when considering an investment.