I don’t get your point. Its natural for early investors to exit to matured investors. Arman is following that cycle as it crosses 2000cr AUM. The december QIP showed interest from BoA and SocGen. Are you suggesting they didn’t do their due diligence?
Hi Shubham.
Azad Engineering operates four advanced manufacturing facilities in Hyderabad, Telangana, India, boasting the capability to produce high precision forged and machined components across approximately 20,000 square meters of total manufacturing space. Additionally, the company has two upcoming manufacturing facilities planned in Telangana, which will be 10x their capacity in the time to come.
The important thing to note here is that these new facilities are intended to be financed through internal accruals. In light of the negative operating cash flow generation, it will surely be a key monitorable as and when capital is to be employed for these expansions.
For the first phase of expansion starting FY25, Azad has already set aside Rs. 120 Crore from the IPO proceeds. The proposed manufacturing facility is expected to feature a dedicated manufacturing / production line catering exclusively to specific customers. This is huge in terms of running efficient operations, while also compressing your working capital cycle.
The important thing to note here is that it is because of the stringent qualification process (might take 3-4 years to get qualified) for each of their highly critical products that their cash flow from operations are negative at this stage. Quality tests and spares leads to high build up of inventory.
Azad also intends to augment their facilities by undertaking inorganic acquisitions to enhance their manufacturing facilities and provide value-added services adjacent to their business.
Azad has already set-up a subsidiary of a recent acquisition which will help in reducing its dependency on 3rd parties as it will cater to captive requirements while also serving other OEMs. This will again help in reducing the inventory built up.
The capacity is optimally being utilized at about 80-85% capacity, Azad has over delivered on its topline growth in FY24. Utilizing the same operating capacity and further optimizing on its efficiency, and with ~Rs. 3200 Crore order book (Rs. 1700 from A&D and Rs. 1500 from Energy/Oil & Gas) sealed, the management is confident of delivering a 25-30% of topline growth and ~30-35% EBITDA growth with ~35% OPM in FY25.
It is evident from the management commentary that the IPO proceeds have helped tremendously in strengthening their balance sheet and its utilization in further capex will result in FY26 to be an inflection point for Azad where they can even outpace their current run-rate of ~30-35% topline growth. Moreover, they plan to further deleverage their balance sheet in FY25.
With product mix shifting towards high value added adjacencies and interest cost coming down, we might see an increase in the EPS of the company from FY26 onwards.
Add into it the matter of working capital normalizing, Azad’s return on capital will gradually increase sequentially in the time to come. However, a company which is bleeding cash flow at operating level and trading at such high valuations can be optically repulsive to investors and understandably so.
But a business which is commanding gross margins of 82-87% and has an unconventional knack of only targeting complex and critical products is surely to be looked at with an interest. More so, when the Total Addressable Market is $28bn and growing. Though Azad currently might have only 1% of the wallet share of this market, any incremental increase of 100-200 bps in market share will be a huge topline turner.
The company in its latest GTRE/DRDO order win said “By entering the production of complete gas turbines, AZAD is set to play a more integral role in India’s defense sector manufacturing capabilities, enhancing self-reliance Prime Minister Shri Narendra Modi Ji’s vision of “Atma Nirbhar Bharat”. Well ,such companies are refreshing, especially as the company and its promoters are young and hungry for nation-building. So there is a bit of sentimentality also attached here, I won’t lie.
The world order is changing and global supply chains are in a flux. Bharat needs to seize the moment. It’s now or never, and companies like Azad are showing courage and confidence. It’s about time we started ‘building and manufacturing’ things and not rely on imports. There are second order effects of this which will help us in the long run but none will be as consequential than what Krishna espouses in Gita.
PS. @protosphinx is a huge proponent of manufacturing in India.
Source: X/ @protosphinx
Hi, Thanks for your revert. Do you have any other data available of Shriram AMC? I would be tracking quarterly AAUM data. Data i am looking for: AUM Split between Equity/Debt, Ongoing SIPs, any other relevant data
Its PLI income. Please read note 3 page 17, copied below
The net profit margin is only 2 %. What are all items that sell? How popular is there brand? Are they selling only in one state or few states? How would they improve the margins in future?
Disc: invested
As a long-term investor, I see significant potential in SBCL providing impressive returns. However, the substantial increase in “other income” raises some questions. I haven’t come across any news regarding the sale of large assets that could justify this unusually high figure. When examining the revenue, it appears to be flat. This might be due to a typical yearly cycle, but as I am still in the process of understanding the company’s patterns, this warrants further investigation.
Additionally, the 8% increase in expenses is concerning. A notable rise in raw material costs could be a contributing factor, possibly due to a surge in copper prices or other similar inputs. Given these factors, the flat sales figures are somewhat disconcerting.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/e9fd5a10-97eb-492b-a84e-c3dd95fcbe63.pdf
Key points from the conference call: The FY25 capital expenditure plan is set at 800 crore, to be funded through a mix of equity, debt, and vendor financing. The MRR could increase to 16 rupees with full capacity utilization, up from the current 10.8 rupees. Management is highly confident in their competitive advantage and the industry demand outlook. They are also planning geographical expansions, which will significantly increase their Total Addressable Market
My problem
Monitoring execution capabilities of management and how trustworthy are there assessment of market conditions over a period.
This is to undertsand whether management is sincere while providing comments in concall or they are agressive and dont deliver
Would you mind elaborating? Thanks.
Does anyone know the reason behind the surge in cost?
Revenue growth looks promising, but why can’t they convert that to bottom line growth?
