Afcons Infrastructure Limited
Know the Company
Afcons Infrastructure Ltd (AIL) is the flagship engineering and construction company of the Shapoorji Pallonji (SP) Group, one of India’s oldest and most reputed business conglomerates with a legacy spanning 150 years. Incorporated in 1976 as Asia Foundations and Constructions Limited, AIL specializes in executing complex engineering and construction projects across diverse sectors, including marine works, bridges, tunnels, highways, metro rail systems, and oil & gas infrastructure.
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The company’s business is primarily divided into five verticals such as Urban Infrastructure: This includes elevated metro, underground metro, and bridges. Surface Transport: Comprising roads and railways. Hydro and Underground: Encompassing tunnels, dams, water projects, and barrages. Marine and Industrial: Focused on jetties, ports, LNG tanks, and related infrastructure. Oil and Gas: Involving offshore works and related facilities. The company has presence in over 25 countries across Africa, the Middle East, South Asia, and 15 states within India.
AIL successfully launched its Initial Public Offering (IPO) in October 2024, at a price of Rs 463 per share, raising Rs 5,430 crore. The issue was a combination of a fresh issue of 2.7 crore shares, amounting to Rs 1,250 crore, and an offer for sale of 9.03 crore shares, aggregating to Rs 4,180 crore.
Strengths
Afcon has established itself as a leader in delivering innovative and technically challenging infrastructure projects both in India and abroad. The company’s technical expertise is unmatched, as evidenced by its ability to execute projects in some of the most demanding environments, including harsh terrains, deep waters, and high-altitude regions. AIL’s consistent ability to deliver projects on or ahead of schedule has earned it the trust and satisfaction of its clients, leading to recurring orders and long-term relationships. Afcons’ ability to undertake complex, challenging, and unique projects is a testament to its engineering prowess and project management capabilities. The company has successfully delivered many ‘first of its kind’ infrastructure projects in India and overseas, including landmark developments in Asia, Africa, and the Middle East. The company’s achievements in marine and port facilities, bridges, transportation, and aqueducts set it apart from its competitors. Its consistent presence in ENR’s global rankings, as the only Indian company to feature in the top positions across multiple categories, speaks volumes about its technical excellence and global competitiveness.
Over the years, Afcons has significantly expanded its geographical footprint. It has successfully executed projects across 15 Indian states and 14 countries worldwide. With an ambitious plan to achieve a 70:30 ratio between domestic and overseas markets in its order book, the company demonstrates a clear vision for sustained global growth.
The company’s consistent ranking by Engineering News-Record (ENR) further highlights its status in the infrastructure sector. In 2023, Afcons was ranked as the 10th largest marine contractor, the 12th largest bridge contractor, and the 18th largest aqueduct contractor in the world. Notably, it is the only Indian construction company to feature among the top 25 in these categories, underscoring its excellence on a global stage.
Afcons has a robust balance sheet, with a track record of strong performance and efficient capital utilization. The company’s financial strength is evident in its industry-leading ROCE and EBITDA margins and the fastest PAT growth among large Indian infrastructure firms between FY 2022 and FY 2024, as per the Fitch Report.
Innovation and knowledge management are core to AIL’s success. The company’s project management system is designed for efficient planning, monitoring, and execution, enabling timely delivery of infrastructure projects. This commitment to excellence has been recognized with the prestigious MIKE (Most Innovative Knowledge Enterprise) award at both global and India levels. The award, conferred by the International Global MIKE Study Group, reflects Afcons’ focus on effective knowledge management and innovative practices.
Afcons has a strong order pipeline in place. In October 2024, the Afcons-Hindustan JV emerged as the L-1 bidder for a Rs 504 crore water supply project under the government’s Jal Jeevan Mission. Subsequently, in November 2024, the company secured a Rs 1,274 crore order from the Uttarakhand Project Development and Construction Corporation Ltd for civil works, for the construction of a 130.6 m high concrete gravity dam and accessory works.
Afcons Infrastructure has already secured orders worth Rs 9,000 crore in the first half of the current financial year, along with L-1 bids amounting to Rs 10,154 crore. Additionally, the company anticipates order inflows of around Rs 5,000 crore for the remainder of the year, surpassing its initial guidance of Rs 20,000 crore. As of September 2024, the company’s total order book stood at over Rs 34,152 crore encompassing 70 active projects in 12 countries.
With a robust order book, a strong pipeline of projects, proven ability to deliver projects on time, and consistent execution of superior-quality construction, Afcons enjoys a significant competitive advantage. This positions the company for solid revenue visibility and growth in the coming financial years.
Financials
Afcons reported robust financial and operational performance for Q2 and H1 of FY25, achieving its highest-ever EBITDA and net profit. The company’s EBITDA margin for Q2 FY25 reached a record high of 13.8%. For H1 FY25, the EBITDA margin improved by 200 basis points to 12.7% compared to the previous year. The company’s consolidated net profit rose by 30% to Rs 135 crore despite an 11% decline in revenue from operations to Rs 2960 crore in Q2 FY25 compared to Q2 FY24. For the half year, the company reported a PAT of Rs 9227 crore, reflecting a 3.6% increase over the first half of the previous financial year.
Afcon’s Balance sheet is strong. As of September 2024, the company’s net debt stood at Rs 2,640 crores, with a debt-to-equity ratio of approximately 0.7. However, as of November 2024, after completion of the IPO, AIL’s net debt has decreased to around Rs 2,000 crores, comprising a roughly equal split between long-term and short-term debt.
Outlook
India is poised to become the fastest-growing construction market globally, with projections indicating it will reach Rs 38.5 trillion by FY2028. The government’s increased focus on infrastructure spending is expected to drive the sector’s growth at a CAGR of 10% between FY23 and FY28. Additionally, in the international markets where the company operate, anticipate outpacing most major global markets from 2024 to 2033.
With a robust presence both domestically and internationally, Afcon is well-positioned to capitalize on these significant growth opportunities. With a robust order book of over 34,000 crores, excluding L1 projects of around Rs 10,154 crores, Afcon’s near future looks promising.
With the government support, India’s construction sector has emerged as a vital pillar of economic development, demonstrating robust growth and potential. Going forward, investments in infrastructure development, supportive govt policies and innovation will strengthen the domestic construction sector. Opportunities for civil construction companies including Afcon including in large- bridges, road tunnels, and border connectivity. Apart from that Railway Infrastructure and Economic Corridors also boon for the companies.
Risk and Concerns
Disputes among major economies can disrupt supply chains and increase material costs, potentially affecting the company’s margins. A prolonged economic downturn across the globe can significantly hamper business opportunities. The execution of infrastructure projects is largely dependent on government spending. Any diversion of funds from infrastructure projects to social and health sectors may adversely impact the company’s order flow and financial performance.
Sector: Construction
Market Price: Rs. 540.25 as on today
FV: Rs 10/-
Stock Name: Afcons Infrastructure Ltd
BSE Code: 544280, NSE Code: AFCONS
Market Cap.: ₹19860 Crore
Book Value: Rs. 110.2
Segment: Civil Construction
Incorporation: 1976
Headquarters: Mumbai, India
