Diffusion Engineers Limited IPO: Check IPO Date, Lot Size, Price & Details

Introduction:

Diffusion Engineers is engaged in the business of manufacturing welding consumables, wear plates and wear parts, and heavy engineering machinery for core industries. With over four decades of experience, the Company is dedicated to provide specialized repairs and reconditioning services for heavy machinery and equipment. The company is also involved in trading of anti-wear powders and welding and cutting machinery.

It presently operates from four manufacturing units, out of which Unit I, II and III are located in Nagpur Industrial Area, Hingna, Nagpur – 440 016, Maharashtra and Unit IV is located in Khapri (Uma), Nagpur – 441 501, Maharashtra for processing and manufacturing of our products

IPO Details:

Objectives of Issue:

• Funding capital expenditure requirements towards the expansion of our existing manufacturing facility at Khasra.
• Setting up of a new manufacturing facility
• Funding working capital requirements of the Company
• General Corporate Purposes.

Key Strengths:

• Diversified Customer Mix- The company top 5 customers contributes 20% of its revenue while its top 20 customers generates 30% of its Revenue. Additionally revenue diversification by region displays that each region contributes 18% of the revenue on average with 23% being the highest and 14.5% being the lowest. The statistics display the healthy diversification of the company.

• Consistent Performance – Over the years, the company has evolved from a single-product manufacturer to a multi-product enterprise, achieving steady growth in revenue and profitability. Its revenue increased from ₹878.37 million in FY 2013 to ₹2,571.26 million in FY 2024, reflecting a CAGR of 10.26%. Similarly, its PAT rose from ₹73.22 million to ₹233.95 million during the same period, with a CAGR of 11.14%. Between FY 2021-2024, it ranked third in operating income CAGR at 21%, second in PAT CAGR at 38%, and third in EBITDA CAGR at 33%.

• Focus on Forward Integration- The company began by manufacturing welding electrodes and expanded its offerings to include flux-cored wire in 1997. Building on this, it started producing wear plates, which are further used in creating wear parts and heavy engineering equipment. This forward integration has transformed its business from a welding electrode manufacturer to a broader provider of flux-cored wires, wear plates, and heavy engineering products 

Risks:

• Concentrated Manufacturing Facility – All the four manufacturing capacity of the company is located in Nagpur, Maharashtra. Any disruption in this area could severely affect the manufacturing capacity of the company thereby affecting the profitability of the company.

• Conflict of Interest- The company’s subsidiaries, including Diffusion Super Conditioning Services, Nowelco Industries, Diffusion Wear Solutions Philippines, and group companies Mecdiff Sdn Bhd and Benvira Forward Algorithms, engage in similar businesses to the company. This may lead to conflicts of interest in business allocation. The company do not have non-compete agreements with these entities, and there is no guarantee that conflicts will not arise or be resolved without impacting its business. 

• Fragmented Industry- In the competitive engineering industry, particularly in welding, anti-wear consumables, and heavy equipment, the company face challenges from both unorganized sector players and established companies. Competitors may benefit from focusing on niche products or having superior financial, technical, and marketing resources. Industry consolidation could further intensify competition by creating larger, stronger rivals. Additionally, factors such as pricing pressures, availability of skilled labor, and exclusive client relationships affect its ability to compete. With low entry barriers, retaining clients and ensuring competitive pricing and quality are vital for sustained success amidst increasing competition.

• Foreign Currency Exposure : The company Generates 10% of its revenue on average in the last 3 years from export. Simultaneously its imported raw material costs around 7% of its revenue. Such transaction exposes the company to foreign exchange fluctuation. The company doesn’t enter into a hedge contract to safeguard itself. Although the company hasn’t suffered any losses in the past 3 years, any adverse event could lead to losses.

Financial Snapshot:

Interest Coverage Ratio – Interest Coverage Ratio determines the ability of a company to fulfill its interest obligations. It is a ratio that compares company earnings (before interest and taxes) to interest expenses. Essentially, it shows how many times a company can pay its interest charges using its operating profit. A higher ICR suggests a company is in a good financial position to handle its debt, while a lower ICR could signal potential financial difficulties.

Debt to Equity Ratio - The debt-to-equity (D/E) ratio is used to evaluate a company’s financial leverage and is calculated by dividing a company’s total liabilities by its shareholder equity. It is a measure of the degree to which a company is financing its operations with debt rather than its own resources.

KPI comparison with Industry Peers