Diffusion Engineers IPO Review: Should You Apply or Not?
Introduction: Welcome, everyone! Today, on 26th September, a new IPO has opened—Diffusion Engineers Ltd. Let’s take a detailed look at this IPO to help you decide whether to invest. We’ll cover the company’s grey market premium (GMP), anchor list, company details, financials, and overall outlook. By the end, you’ll have a clear picture of whether this IPO is worth your investment for listing gains or long-term growth.
IPO Market Insights |
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| Before diving into Diffusion Engineers, I want to point out a trend I’ve noticed. Many YouTube channels, previously focused on music, coaching, or gaming, have now shifted their focus to IPO reviews. With rising interest in IPOs, some creators are jumping on the bandwagon without the necessary knowledge. These channels may be misleading, and it’s crucial to follow those who provide well-researched, fact-based content. As always, do your own research and avoid falling into traps that could lead to financial loss.
Now, back to Diffusion Engineers’ IPO. |
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Grey Market Premium (GMP) & Anchor List |
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| Currently, Diffusion Engineers’ GMP stands around 41%, indicating decent demand in the market. However, remember that GMP is not a fixed parameter, and it fluctuates based on market trends.
The company raised ₹47 crores through its anchor list, which, while small, reflects the modest size of the issue. Notably, HDFC Mutual Fund is part of the anchor list through two schemes, giving some confidence. However, apart from HDFC, there aren’t many big names. I would rate the anchor list a solid 4.5 out of 5, considering the size of the IPO, which totals ₹158 crore. |
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About Diffusion Engineers |
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| Diffusion Engineers, established in 1982, has been in the engineering sector for over four decades. The company is primarily focused on manufacturing products related to welding, such as heavy welding machines, welding consumables (like electrodes), coatings, and wear plates. They also produce spray powders and anti-skid coatings used in heavy industries.
Diffusion Engineers is deeply involved in serving large industries like cement, sugar, glass, and steel, providing both manufacturing and servicing solutions. Major clients include top names like ACC, UltraTech Cement, Tata Steel, and L&T, to name a few. The company has four manufacturing units around Nagpur, Maharashtra, and employs over 130 qualified engineers. |
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Financials |
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| Now, let’s examine the financials for 2022-2024: | |||
Assets |
Increased from ₹199 crore to ₹275 crore, showing steady growth. | ||
Revenue |
Jumped from ₹208.8 crore to ₹285 crore, reflecting a strong sales trend. | ||
Profit |
Climbed from ₹17 crore to ₹30.8 crore, and profit margins have improved to 10.8%, signaling efficiency | ||
Debt |
Borrowings stand at ₹34 crore, with a healthy debt-to-equity ratio of 0.188, indicating the company can comfortably manage its debt. | ||
| Return on equity (ROE) is currently around 18%, and return on capital employed (ROCE) is at 20.3%, both impressive figures for a company of this size. The price-to-earnings (P/E) ratio is 15.35, which seems reasonable when compared to industry peers like Ador Welding and AIA Engineering, whose P/Es range between 29 and 35. | |||
Valuations and Competitors |
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| Diffusion Engineers is smaller in comparison to peers: | |||
Ador Welding |
AIA Engineering |
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| Revenue of ₹883 crore (4x bigger than Diffusion), P/E of 29. | Revenue of ₹1,617 crore (12x bigger than Diffusion), P/E of 35. | ||
| While Diffusion is much smaller, the IPO is reasonably valued, leaving room for growth. However, the company will need to improve its earnings per share (EPS) to catch up with competitors. | |||
Should You Apply for the Diffusion Engineers IPO? |
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| Now, the big question—should you invest? | |||
For Listing Gains |
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| GMP | The grey market premium looks solid at 41%. | ||
| Demand | The IPO is already oversubscribed. | ||
| Anchor List | Decent, with HDFC as a highlight. | ||
| Valuation | Reasonable compared to peers. | ||
| Considering these factors, Diffusion Engineers appears to offer decent listing gains, with minimal risk involved. | |||
For Long-Term Investment |
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| Let’s look at the pros and cons: | |||
Pros: |
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Cons: |
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Overall, Diffusion Engineers presents a balanced opportunity for long-term growth. |
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| However, being a smaller company, it comes with higher risk compared to larger players in the sector. | |||
Conclusion
Whether you’re looking at listing gains or a long-term hold, Diffusion Engineers’ IPO seems to offer value. As always, make sure to apply your own analysis and risk assessment before investing.
Will you be applying for this IPO for the short term or long term? Let me know in the comments! And if this review helped clarify your investment strategy, feel free to share your thoughts.
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