Analysis based on the latest results shared by the company (source: Chat GPT).
1. Financial Health Analysis
Balance Sheet Strength
Assets Growth:
Total assets increased from ₹4,043 Mn (FY22) to ₹7,970 Mn (FY24), indicating expansion and investment in growth.
Increase in property, plant, and equipment (₹2,545 Mn in FY24 from ₹1,444 Mn in FY22) suggests capital expenditure for capacity expansion.
Strong cash balance of ₹281 Mn in FY24, up from ₹44 Mn in FY22.
Liabilities & Debt Position:
Total liabilities decreased significantly from ₹3,852 Mn (FY23) to ₹1,520 Mn (FY24), reducing financial leverage.
Long-term debt reduced from ₹2,208 Mn (FY23) to ₹271 Mn (FY24), suggesting the company has aggressively paid off debt.
Net Debt-to-Equity improved from 1.2x (FY23) to near-zero in FY24, a strong positive sign.
Equity Growth:
Equity increased significantly from ₹1,200 Mn (FY22) to ₹6,450 Mn (FY24) due to new equity infusion.
The company raised ₹7,400 Mn from an IPO, strengthening its financial position.
Cash Flow Analysis
Operating Cash Flow:
The company had negative operating cash flow in FY23 and FY24 (-₹69 Mn in FY24), which is concerning despite high profitability.
Large working capital investments (inventory and receivables) contributed to negative cash flows.
Investing Activities:
Heavy investment in property, plant, and equipment (₹753 Mn in FY24) indicates capacity expansion.
Sale of subsidiary (₹118 Mn in FY24) suggests a portfolio adjustment.
Financing Activities:
Raised ₹2,400 Mn from equity issuance, reducing reliance on debt.
Repaid ₹955 Mn in long-term debt, improving balance sheet strength.
Profitability & Margins
Revenue Growth:
32% CAGR in revenue (FY22-24), growing from ₹1,945 Mn to ₹3,408 Mn.
Exports account for 87%+ of revenue, indicating strong global demand.
EBITDA Growth:
EBITDA grew 37% CAGR (FY22-24), reaching ₹1,187 Mn in FY24.
EBITDA margins ~35%, indicating high profitability.
Net Profit Growth:
Net profit (PAT) grew 41% CAGR (FY22-24), reaching ₹586 Mn in FY24.
PAT margin ~16%, which is strong for a manufacturing company.
Return on Capital Employed (RoCE):
Improved significantly from 13% (FY22) to 19% (FY24).
Adjusted RoCE was 28% in FY24, indicating efficient capital utilization.
2. Growth Prospects
Industry & Market Position
Strong presence in Aerospace, Defence, Energy, and Oil & Gas sectors.
High entry barriers due to strict qualification processes (30-48 months for onboarding new suppliers).
Exclusive supplier relationships with top global OEMs (Boeing, Airbus, GE, Mitsubishi, etc.).
Order backlog from global energy and aerospace OEMs indicates future revenue visibility.
Expansion Plans
Two new manufacturing facilities in Hyderabad planned to increase capacity.
MoU signed for expansion into Saudi Arabia, which could open new markets.
Expansion into Advanced Turbo Gas Generator (ATGG) manufacturing suggests higher-value product development.
Challenges
High customer concentration risk (major revenue from a few large OEMs).
Foreign exchange risk, as 87% of revenue comes from exports.
Capital-intensive industry, requiring continuous investment in technology and capacity.
3. Potential Malpractices or Red Flags
No direct evidence of financial fraud or malpractices was found, but some areas require attention:
Negative Operating Cash Flow:
Despite strong profits, negative cash flows raise concerns about working capital management.
High trade receivables (₹1,699 Mn in FY24) suggest possible payment collection issues.
High Non-Recurring Adjustments:
Frequent adjustments for fire incidents, forex losses, and credit-impaired receivables.
Fire-related expenses were ₹63 Mn in FY23, impacting reported EBITDA.
Significant IPO Fund Utilization:
Raised ₹7,400 Mn from IPO but unclear how much was deployed for actual growth.
Monitoring future use of IPO funds is essential.
4. Conclusion: Should You Invest?
Positives:
Strong financial health with low debt and increasing equity.
Rapid revenue and profit growth with high margins (~35% EBITDA).
Deep relationships with global OEMs in high-entry-barrier industries.
Expanding manufacturing capacity and entering new markets.
Concerns:
Negative operating cash flow, indicating possible working capital issues.
High customer concentration risk.
Execution risk in expansion plans.
Verdict: Azad Engineering appears to be a fundamentally strong company with high growth potential, but investors should closely monitor cash flows and IPO fund utilization.
Company announced equity share allotment for QIBs, the company’s paid-up capital has increased from ₹118.23 Cr (59,112,993 shares) to ₹129.16 Cr (6,45,81,743 shares). With the current market price at ₹1227 and the pre-issue P/E at 94.7, the dilution impact lowers the EPS to approximately ₹11.87. Assuming no immediate earnings change, the post-issue P/E rises to around 103.4. This dilution effect could impact valuations, so it’ll be interesting to see how the market reacts. Thoughts?
Can someone explain why a company which claims to supply mission critical has negative cash flow from operations from the past 2 years? In my experience good quality machining & casting shops are always in high demand and clients pay an advance before the work starts. And payments happen promptly after the work is completed. Why is this not the case with Azad?
Unimesh story is different, we should not compare Azad with Unimesh.
Unimesh just supplying some maintenance tools to aviation industry either its airlines or OEMs, Even though these tools are slightly complex but they are not so critical like Azad products.
Retailers thought that Unimesh also trade at Azad valuations post listing but it trapped all people
I think comparison with Jyoti cnc is also not right. Jyoti is providing cnc machines to produce components. Azad will be using cnc machines to design and make components. Jyoti CNC works one layer below azad
Negative cash flows are because the company provides many of its components to OEMs like Rolls Royce, GE, etc. for validation and expenses it out from the P&L. As and when it approves, Azad gets orders from these OEMs. Otherwise, balance sheet strength is very good, and also, these big OEMs never default on payments, so the debtor profile is one of the best.
Will deliver 2 AMCA engines in Fy 26, first jet engine to be made in India
In Nuclear capabilities (only EDF accredited, global supplier in India), only company in India, whenever the orders start coming
2 lean manufacturing plants have been operationalised, 8 more in the make, simultaneously
Tariffs@25%…the cost advantage vs China, Korea, japan are over 25-35% and the order book buildup is against backdrop and competitive landscape, and hence the differential is unlikely to be altered given the tariff rates on these countries. Exposure to US is 40%.
Capex of 450cr in CFY, 300Cr towards capacity additions with asset turns of 1.8, will enable addition of 550cr to annual turnover
Order book of 6k to be liquidated in 5-6 years. long term orders are $400M for energy, $200M in defence and $100M for gas/oil
Mgt team strengthened to cater for the growth and expansion…
Disc- watching… the management responses during the call seemed relatively mature wrt growth projections, the confidence ( rather over confidence) has given way to reasonable prudence.
This 500 Cr additional revenue from capex of 300 Cr is already factored in.
Valuations will come down from 100 P/E to 50 P/E after they achieve 1000 Cr revenue mark in FY27.
Whether they can turn this 1000 Cr to 2000 Cr by FY29 after infusing capex of 500-600 Cr is questionable.
Betting on FY29 in FY26 would be not much realistic.
We’ve just released our deep-dive on Azad Engineering.
At a time when global aerospace and energy supply chains are being rebuilt, Azad sits quietly at the center of some of the world’s most critical platforms. This report looks beyond near-term numbers and focuses on what really matters: Capabilities, multi-year order visibility, OEM-led capacity expansion, margin inflection, and why India’s precision manufacturing moment is just getting started.
From understanding where Azad sits in global OEM value chains to why returns and asset efficiency are at an inflection point, this report connects the dots most surface-level analyses miss.
For investors tracking Energy, aerospace, defence, and high-entry-barrier manufacturing stories, this is a read worth your time. Trinetra Asset Managers - Azad Engineering.pdf (4.0 MB)
No direct evidence of financial fraud or malpractices was found, but some areas require attention:
Positives:
Concerns:
Verdict:
Azad Engineering appears to be a fundamentally strong company with high growth potential, but investors should closely monitor cash flows and IPO fund utilization.
