Intensive Review of Diffusion Engineers Limited IPO

Table of Contents

About the Diffusion Engineers IPO

The name Diffusion Engineers Ltd. is synonymous with more than forty years of service in manufacturing welding consumables, wear plates, and heavy machinery. It is entering the capital market with an IPO scheduled between September 26 to September 30, 2024. This IPO is for fresh issue only, with no offer for sale, and is looking to raise ₹158 crores.

Diffusion Engineers Limited: A Panoramic Company Profile

The funds proposed to be used for the plan include setting up new manufacturing facilities, working capital, and general corporate purposes, which speak to the aggressive growth plans .

Diffusion Engineers Limited IPO Details

Pricing and Structure: The price band for the IPO has been kept at ₹159 to ₹168 per share with a fixed lot size of 88 shares for a retail investor. This process has allowed the minimum investment amount to be ₹14,784 thereby catering to a wide cross-section of investors.

Here’s a timeline of Diffusion Engineers Limited IPO:

This table reflects the critical timelines for investors and subscribers of the Diffusion Engineers Limited IPO, providing a clear schedule for each stage from subscription through to listing.

Event	Date
IPO Opening Date	September 26, 2024
IPO Closing Date	September 30, 2024
Basis of Allotment	October 1, 2024
Refunds Initiation	October 2, 2024
Credit of Shares to Demat	October 3, 2024
IPO Listing Date	October 4, 2024

Here is the updated table with details for the Diffusion Engineers Limited IPO:

IPO Details	Information
Company Name	Diffusion Engineers Limited
IPO Size	₹50.23 crore
New Issue	₹50.23 crore (X lakh equity shares)
Price Band	₹100 – ₹105 per share
Face Value	₹10 per share
Listing Exchange	NSE SME
Minimum Bid Lot	88 shares
Minimum Investment	₹14,784
Issue Type	Book-built Issue
Issue Category	SME IPO
QIB Allocation	50%
NII Allocation	15%
Retail Allocation	35%
Company Sector	Engineering and Industrial Products

Diffusion Engineers Limited IPO Financial

An analytical insight into the financial health of Diffusion Engineers paints a bright picture as follows: Operating income and profit after tax have had quite great growth, which leaves several peers in the sector behind.

Comparing March 31, 2024, to March 31, 2023, with more background information at March 31, 2022, from the data supplied on financial information :

Financial Metric	31 Mar 2024	31 Mar 2023	31 Mar 2022	Change 2023-24	Change 2022-23
Assets (₹ Crore)	275.59	230.34	189.55	+19.64%	+21.53%
Revenue (₹ Crore)	285.56	258.67	208.75	+10.40%	+23.90%
Profit After Tax (PAT) (₹ Crore)	30.8	22.15	17.05	+39.04%	+29.91%
Net Worth (₹ Crore)	190.7	142	120.65	+34.30%	+17.71%
Reserves and Surplus (₹ Crore)	163.03	138.39	117.34	+17.81%	+17.94%
Total Borrowing (₹ Crore)	34.44	48.09	24.6	-28.39%	+95.49%

Assets:
Diffusion Engineers Limited has always been a growing company. By analysing the growth of total assets, it has grown by 19.64% from FY 2023 to FY 2024. This may be due to investment in expansion or some acquisition.
Revenue
Revenue growth from FY 2023 to FY 2024: 10.40%, slightly positive; however, the increase is less than what the company delivered last year, suggesting potentially stabilizing or mature market conditions or increased competition in its major lines of business.
PAT (Profit After Tax):
A massive increase of 39.04% in PAT indicates improved profitability, possibly due to better cost management or products with higher margins within its basket.
Net Worth: This might be due to retained earnings, capital injections, or decrease in liabilities because net worth has gone up by 34.30%.

Reserves and Surplus: Reserves and surplus have risen by 17.81%, indicating the company has a strong grip on maintaining its earnings, a positive sign for future reinvestments or returns to shareholders.

Total Borrowing: A strong decline in overall borrowing by 28.39% from FY 2023 to FY 2024 may suggest that this is a hedge to reduce financial leverage, thereby possible reduction in the interest costs and consequently increased profitability.

Comparison Insights:

Growth Trends :
Decrease in revenue growth: Revenue growth from year 2022 to 2023 is lower than 2022 to 2023 with growth at 23.90 percent while it was flat from 2023 to 2024 at 10.40 percent – PAT growth, however, has increased. It could be a sign of improving operational efficiencies or a shift towards higher-margin products.
Debt Management:
Deep contraction in borrowing in FY 2024 against sharp increase in FY 2023, may indicate strategic repayment of the debt following the funding of an expansion spurt in the previous year.
Investment and Growth:
This should read: – Assets and net worth growth coupled with revenue growth represents a story of a company reinvesting in its growth, perhaps in the guise of new lines of business or creating more capabilities.

This financial overview positions Diffusion Engineers Limited as a company that enjoys healthy finances, taking good care of the debt management with strategic and prudent measures, which may attract investors who are turning their attention to the IPO both for short-term listings and long-term stability. However, broader market conditions and sector-specific risks need to be considered by potential investors.

Diffusion Engineers Limited IPO GMP and Subscription

As of September 28, 2024, here is a summary of the IPO of Diffusion Engineers Limited, in the light of information found from different sources about Grey Market Premium (GMP) and subscription status.

Grey Market Premium (GMP):
The GMP for the IPO of Diffusion Engineers Limited has been observed to range up to 50% over the issue price. This invariably means that the grey market, where shares are traded before the official listing, hopes to have a listing price above the issue price by this percentage.
Subscription Status:
These proved to be a good portent on the opening day of subscription of this IPO, which saw an overall subscription of over seven times. More particularly:
• Retail investors came out in great numbers; the subscription rate in some days touched 33.91 times.
• The NIIs also turned out quite interested with subscription rates reaching up to 47.08 times.
While the Qualified Institutional Buyers segment has been somewhat poorly subscribed at an initial level of 0.28 times, that number may not indicate a final subscription status since the IPO remains open.

Market Sentiment
The average subscription by subscribers, especially from the retail and NII segments, coupled with a positive GMP, suggests an upbeat market sentiment towards the IPO of Diffusion Engineers Limited. Optimism could very well be reflecting the health of the company in terms of its financials, sector performance, or market expectations relating to the potential for growth.

Additional Context:

The IPOs will open from 26 September to 30 September 2024. It has issued price band in the range of ₹159 to ₹168 per equity share. The basis of allotment was ₹168.
Funds raised amount would be ₹158 crore. Funds are towards expansion of manufacturing facilities and for other general corporate purposes.
There was also a talking point about an in-house reservation at a reduced price for employees, which is an indication of the confidence within the ranks that things are going to get brighter in the near future.

The numbers released are a reflection both of the quantitative appeal of subscription, as well as the qualitative aspect through GMP, and will give prospective investors a better understanding of expectations in the market towards the prospectus-issued stock of Diffusion Engineers Limited in the post-listing scenario. Once again though, the investor should be quite cautious of these numbers, for GMP and subscription rates may not necessarily reflect resultant listing gains or medium-and long-term investment value as this may also be easily swayed by speculative trading.

Diffusion Engineers Limited IPO EPS AND PE Ratio

Based on information gathered up to September 28, 2024, here is a summary of the major Earnings Per Share (EPS) and Price to Earnings Ratio (P/E Ratio) for the Diffusion Engineers Limited IPO:

Earnings Per Share (EPS):
Diffusion Engineers Limited’s EPS for fiscal year 2024 was calculated at ₹10.94 with a pre-issue shareholding basis. The amount represents the earnings of the company on a per-share basis before the company went for its IPO.

Price to Earnings Ratio (P/E Ratio):
At the upper price band of the IPO at ₹168, the P/E ratio for the IPO was estimated at around 15.36. The P/E ratio assesses the market price of a share relative to its earnings per share, thus providing an indication of whether the stock is overvalued or undervalued based on its earnings.

Relative to the industry average P/E ratio of 32.45, the IPO of Diffusion Engineers Limited seems undervalued simply from this metric. This would indicate investors are viewing the shares as being reasonably or even attractively priced regarding the earnings that they are buying per share of stock.
Market Sentiment and Analysis:
The lower P/E ratio compared to that of the industry could be taken as an indication of potential value: perhaps the market would expect less future growth for Diffusion Engineers Limited relative to its peers, or perhaps it simply reflects more conservative valuation.
Investment Considerations
The best way would be to say that while the P/E ratio indicates a state of undervaluation, investors should consider several other factors such as the prospects for growth with respect to the company, level of debt, competition in the market, and broader aspects of the economy. Thus, there is also the risk that a low P/E reflects skepticism about future growth or an upper hand of decreasing profitability.

Risks and Concerns

Market Risks: The overall positive sentiment notwithstanding, the IPO could well be affected by prevailing market sentiments if a drift towards a bearish trend is noticed.
Company-Specific Risks: Other risks would possibly include operational ones such as vulnerability to dependability on receivables or market competition over profitability levels.

Conclusion

The real impetus to investment could be the IPO by Diffusion Engineers in view of investors looking at short-term listing appreciation and long-term growth in the industry, but the potential investors must weigh these opportunities against the inherent risks of IPO investments.

Appendices or Further Reading

To gain a more informed view, read the detailed financial reports or the analyst breakdown from the leading financial institutions, providing deeper insight into the company’s projections and market positioning.