Diffusion Engineers IPO subscribed 16x on Day 2 so far; NII & retails portions booked 21x times

The initial public offering (IPO) of Diffusion Engineers saw a continued to see a decent response from the investors during the second day of the bidding process. The issue, which kicked-off for bidding on Thursday, September 26, was overall booked more than 7 times on the first day of subscription.

Nagpur-based Diffusion Engineers is selling its shares in the price band of Rs 159-168 apiece. Investors can apply for a minimum of 88 shares and its multiples thereafter. It is looking to raise Rs 158 crore via IPO, which is entirely a fresh share sale of 94,05,000  equity shares.

According to the data, the investors made bids for 10,28,99,632 equity shares, or 15.59 times, compared to the 65,98,500 equity shares offered for the subscription by 12.55 pm on Friday, September 27. The three-day bidding for the issue will conclude on Monday, September 30.

The allocation for retail investors was subscribed 21.89 times, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 21.24 times. The allocation for employees was booked 26.68 times. However, the quota set aside for qualified institutional bidders (QIBs) saw bids for merely 4 per cent as of the time.

Incorporated in 1982, Nagpur-based Diffusion Engineers is active in the manufacture of welding consumables, wear plates and parts, and heavy machinery for core industries. The company offers specialized repair and reconditioning services for heavy machinery and equipment.

The grey market premium (GMP) for the Diffusion Engineers has been inched higher hinting for a strong gains for the investors on debut. Last heard, the company was commanding a premium of Rs 90 in the unofficial market, suggesting a listing pop of about 54 per cent for the investors.

Brokerage firms, largely have a positive view on the issue and suggest to subscribe for a long term citing its sound financial performance, expansion plans, strong hold in the market, rising demand and reasonable valuations. However, dependence on Indian clients, delay in setting facilities and approval related nature of business are the major concerns.

Diffusion manufactures welding consumables, wear plates, wear parts, and heavy engineering machinery for core industries. It has consistently increased its revenue and profit over the past few years, said SMC Global. "With the anticipated increase in infrastructure and industrialization spending, the company is wellpositioned forfuture growth" it added with a 'subscribe for long term' tag.

The issue includes a reservation of up to 50,000 shares for eligible employees of the company, who shall be offered at a discount of Rs 8 apiece. The company has reserved 50 per cent of the net offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) have 15 per cent of the allocation. Retail investors will get the remaining 35 per cent of the net offer.

The Welding consumables market in India is estimated at around Rs 5,100 crore in fiscal 2024, with fiscal 2027 projections around Rs 6,400-6,600 crore, said Ventura Securities. "It possesses the expertise to design, develop and manufacture complex and specialized industrial equipment and components for OEMs and end -user industries," it added with a 'subscribe' rating.

On the other hand, the brokerage has cited dependence on the domestic market and  negative cash flow as the key risks. "If this trend continues, it could strain the company’s liquidity and affect its ability to fund operations, investments, and debt obligations, leading to adverse effects on overall financial health," Ventura added.

Unistone Capital is the sole book running lead manager of the Diffusion Engineers IPO, while Bigshare Services is the registrar for the issue. Shares of the company shall be on both BSE and NSE with October 4, Friday, as the tentative date of listing on the bourses.