Afcons Infrastructure Explores ₹4000 Cr pre-IPO Placement

Shapoorji Pallonji Group’s subsidiary, Afcons Infrastructure, is all set to conduct its pre-listing sale of ₹4000 Cr as per the sources. The move would attract esteemed investors, thereby enhancing the credibility of the company and potentially scaling its IPO down before the launch in October. The IPO would coincide with some of the other major listings, including NTPC Green Energy, Hyundai India, and Swiggy.

According to a deal-involved banker, “The pre-IPO placement is almost finalised. The participants have established a solid valuation floor for the IPO. The pre-IPO deal is worth close to $500 million.”

He further added that large domestic mutual funds and the global sovereign fund would be amidst the allottees. The company has declined any comment on this matter.

Pre-IPO placements occur after the offer document is filed. The raised amount via this route results in the IPO size reduction to that extent.

2nd half of October is the expected timeline for entering the market during October’s second half. The offering is said to be crucial for SP Group’s firm, Goswami Infratech (GIPL), the promoter for fulfilling the commitment towards bondholders.

The banker then added, “Afcons is seeing strong demand from institutional investors. Some of these larger investors wanted a bigger allocation, which is not feasible at the time of the IPO, except during the anchor book to some extent.”

The IPO of Afcons includes the fresh fundraising of ₹1250 Cr that is planned to be used for the repayment of debt, meeting working capital requirements, and purchase of construction equipment. According to the sources, Afcons plans for upsizing the issue size is due to the demand for the shares.

The offered remainder will consist of the secondary share sale by the GIPL, the proceeds of which will be used for repayment of bondholders.

The GIPL has been pledged the shares to the lenders. The company amended the pledge agreement to allow for share release if it opted for the pre-IPO sales, as per the source.

In the DRHP, Afcons stated one of its risk factors said that “As of the date of this draft red herring prospectus (DRHP), an aggregate of 330.9 million equity shares held by our promoters, including GIPL, Shapoorji Pallonji, and Floreat Investments, representing 97.11 per cent of our share capital, remain pledged in favour of certain lenders and a debenture trustee. Of these, 75 million pledged equity shares held by GIPL have been released prior to the filing of the DRHP towards the minimum promoter contribution, pursuant to and subject to the terms and conditions set out in the consent... Further, the pledge on the remaining equity shares of the company, held by GIPL, which will be included in the offer for sale, will be released five business days prior to the filing of the updated DRHP with the Securities and Exchange Board of India.”

Afcons is the 2nd SP Group’s IPO after one from Sterling and Wilson Renewable Energy in 2019.

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