What You Must Know About Afcom Holdings IPO: Price Band ₹102 to ₹108 Per Share

About Afcom Holdings Limited

Afcom Holdings Limited, incorporated in 2013 as a private limited company, was founded by Capt. Deepak Parasuraman with a vision to enter the cargo airline business. In 2017, the company obtained an NOC from the Ministry of Civil Aviation, India, to operate cargo airlines. Afcom Holdings has been running cargo flights to ASEAN countries, particularly Singapore.

A management team with extensive industry experience leads the company. The promoters, Capt. Deepak Parasuraman, Wg. Cdr Jagan Mohan Manthena, Kannan Ramakrishnan, and Manjula Annamalai have been instrumental in the company's growth. Both Capt. Deepak Parasuraman and Wg. Cdr Jaganmohan Manthena bring over three decades of aviation industry experience, while Kannan Ramakrishnan contributes extensive experience from the automobile retail industry.

The objective of the Issue

•  Funding capital expenditure for leasing two new aircraft

•  Repayment or prepayment of certain outstanding borrowings

•  Funding working capital requirements

•  General corporate purposes

•  Meeting issue expenses

Highlights of the Afcom Holdings IPO

Afcom Holdings Limited is launching its IPO on the Bombay Stock Exchange (BSE) SME segment. Here are the key details of the IPO:

• The issue opens for subscription on August 2, 2024, and closes on August 6, 2024. Afcom Holdings Limited shares have a face value of ₹10 per share. The price band for this book-built issue is set at ₹102 to ₹108 per share.

• Afcom Holdings IPO consists only of a fresh issue component, with no offer for sale (OFS) portion. The company will issue a total of 68,40,000 shares (68.4 lakh shares), which, at the upper price band of ₹108 per share, aggregates to a fresh fundraising of ₹73.83 crore.

• The issue includes a market-making portion with an allocation of 3,54,000 shares. Giriraj Stock Broking will serve as the market maker for the issue, providing two-way quotes to ensure liquidity post-listing.

• The company's pre-issue shareholding stands at 1,80,21,306 shares, which will increase to 2,48,57,706 shares post-issue. Funds raised from the fresh issue will be used for various purposes, including funding capital expenditures for leasing two new aircraft, repaying outstanding borrowings, funding working capital requirements, general corporate purposes, and meeting issue expenses.

• GYR Capital Advisors Private Limited is the lead manager of the issue, Link Intime India Private Ltd is the registrar, and Giriraj Stock Broking will act as the market maker. The IPO of Afcom Holdings Limited will be listed in the SME segment of the BSE.

Afcom Holdings IPO: Key Dates

Afcom Holdings Issue Details/ Capital History

Afcom Holdings Limited is set to launch an Initial Public Offering (IPO) to raise to ₹73.86 crore. The issue comprises 68,40,000 equity shares with a face value of ₹10 each, priced between ₹102 and ₹108 per share. The IPO will open for subscription on August 2, 2024, and close on August 6, 2024. Investors can apply for a minimum of 1,200 shares.

The company’s shares will be listed on the BSE SME platform post-issue. GYR Capital Advisors Pvt. Ltd. is the lead manager, while Link Intime India Pvt. Ltd. is the registrar. Giriraj Stock Broking Pvt. Ltd. will participate as a market maker, subscribing to 3,54,000 shares.

IPO Allocation and Minimum Investment Lot Size

Afcom Holdings Limited has announced the market maker allocation at 3,54,000 shares as inventory for market making. Giriraj Stock Broking will serve as the market maker for the IPO. The breakdown of the overall IPO allocation to various categories is as follows:

The minimum lot size for IPO investment is 1,200 shares. Retail investors can invest a minimum of ₹129,600 (1,200 x ₹108 per share at the upper price band) in the IPO. This is also the maximum that retail investors can invest. HNI/NII investors can invest a minimum of 2 lots, comprising 2,400 shares with a minimum lot value of ₹259,200. There is no upper limit on what the QIBs and HNI/NII investors can apply for. The table below shows the break-up of lot sizes for different categories:

SWOT Analysis: Afcom Holdings Limited

Strengths

• Experienced leadership with over 20 years in the aviation industry

• Strong management team of qualified professionals

• Established network of GSSAs across multiple countries

• NOC from Ministry of Civil Aviation to operate cargo airlines

• Focus on airport-to-airport cargo carriage
 

Weaknesses

• Relatively new entrant in the competitive cargo airline industry

• Limited geographical presence compared to larger, established players

• Potential dependency on key management personnel

• Capital-intensive nature of the airline business

Opportunities

• Growing demand for air cargo services, especially in ASEAN countries

• Potential for expansion into new routes and markets

• Increasing e-commerce and cross-border trade driving cargo demand

• Possibilities for strategic partnerships and alliances
 

Threats

• Intense competition from established cargo airlines and logistics companies

• Regulatory changes in the aviation sector

• Fluctuations in fuel prices impacting operational costs

• Economic downturns affecting trade and cargo volumes

• Geopolitical tensions disrupting international trade routes

Financial Highlights: Afcom Holdings Limited

Source: BSE: Afcom Holdings Limited DRHP

Afcom Holdings has shown remarkable growth in its revenue, increasing from ₹5,851.51 Lakhs in FY22 to ₹24,732.09 Lakhs for the period ended 29th February 2024.

The company's EBITDA Margin has shown substantial improvement, 20.37% in FY22 to 24.59% for the period ended 29th February 2024. 

The PAT margin has improved significantly, reaching ₹2621.43 Lakh in the most recent period compared to ₹87.87 Lakh in FY22.

The Debt-Equity ratio has increased slightly from 0.01 in FY23 to 0.15 in the latest period, but it remains comfortable, indicating low financial leverage.

Overall, Afcom Holdings IPO demonstrates strong growth in revenue and profitability, with improving financial metrics across most areas. The company has shown its ability to scale operations rapidly while maintaining healthy margins. The low debt-equity ratio indicates financial stability, although it has increased slightly in the most recent period.