Afcons Infra’s IPO Buzz: Shapoorji Pallonji Group Arm Hits Record ₹19,000 Crore Order Inflow in H1 FY25

Mumbai: Afcons Infrastructure Ltd, which is preparing for its IPO, has secured a record number of new orders in the first half of FY25. This business surge is more than its highest annual order intake so far, driven by the company’s expanding credit lines from banks.

Between April and September 2024, Afcons booked orders worth ₹11,400 crore, according to public information and sources familiar with the matter. Additionally, it has emerged as the lowest bidder for ₹7,600 crore worth of projects, which it is expected to finalise soon.

Record-breaking orderbook

These combined orders amount to ₹19,000 crore in just the first half of FY25. This is a significant leap from ₹7,783 crore in FY24 and ₹7,924 crore in FY23, according to the company’s draft prospectus and annual reports. The firm’s previous record for annual orders was in FY22 when it secured contracts worth ₹16,883 crore.

With these new orders, Afcons’ total orderbook is expected to cross ₹40,000 crore for the first time, compared to ₹30,961 crore at the end of FY24.

Afcons did not respond to requests for comments.

Increased bank guarantees

The boost in orders is largely due to the company’s ability to provide more bank guarantees, thanks to larger credit lines. In November 2023, a group of 13 banks led by SBI increased Afcons’ non-fund-based long-term credit from ₹13,250 crore to ₹17,490 crore.

This increase in banking limits has allowed Afcons to bid on more projects, as firms like Afcons are typically required to provide bank guarantees covering 15-20% of a contract’s value. These guarantees include performance bonds, advance payment guarantees, and retained dues guarantees.

“For the past two years, Afcons was cautious with its growth, not wanting to win projects it couldn’t execute due to limited bank guarantees,” said a source. But with the credit line boost, the company was able to bid more aggressively, resulting in record order bookings.

Among the key projects Afcons has secured are the Jamrani Dam in Nainital, the second phase of the Kochi Metro, and the Dharavi-Ghatkopar water tunnel in Mumbai. It has also been the lowest bidder for several other projects, though they are yet to be formally awarded.

Support from SP Group

Afcons’ increased bank guarantees were made possible as its parent company, Shapoorji Pallonji (SP) Group, improved its financial position. Although the SP Group is still recovering, its successful repayment of loans in 2022, following a one-time restructuring, reassured lenders. The group also boosted its liquidity by selling assets like Sterling Wilson Renewable Energy, Eureka Forbes, and ports at Dharamtar and Gopalpur.

“Afcons met all the banks’ requirements for higher limits, but due to SP Group’s financial issues, their credit lines were limited,” a source explained.

After its IPO, Afcons plans to use around ₹500 crore from the new capital to pay off high-interest debt. This move would further improve its banking limits, according to sources.