Airfloa Rail BSE SME IPO review

•    The company is engaged in the manufacturing of components used in rolling stock for railways, and other products used by defence and aerospace segments. 
•    The company marked growth in its top and bottom lines for the reported periods.
•    Boosted profits from FY24 onward raise eyebrows and concern over its sustainability going forward, as competition is on the rise.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Airfloa Rail Technology Ltd. (ARTL) is engaged in the manufacturing of components which are used in the rolling stock for the Indian Railways through railway production units like Integral Coach Factory (“ICF”), other coach factories. In addition to manufacturing the rolling stock components, it carries out turnkey interior furnishing projects for Indian Railways. In the aerospace and defence sectors, the company manufactures intricate, highly engineered, and vital components. Along with Indian Railways through ICF and other coach factories, it also serves other Rail’s factories, and global rolling stock OEMs.

It has manufactured rolling stock components and implemented turnkey interior furnishing projects for Sri Lankan DEMU and Mainline Export Coaches, Agra-Kanpur Metro Coach, RRTS Coach, Vistadome Coach and Train-18 Vande Bharat Express. The Company has been in operation for over 20 years, and it has extensive expertise as a reliable supplier of high-precision forged and machined components for the rolling stock, aerospace, and defence industries, as well as undertaking turnkey interior furnishing projects in railways. The Company has demonstrated consistent financial performance over the last three financial years, reflecting operational stability and growth.

ARTL’s in-house competencies include engineering, design, tooling, material development, finishing, and assembly, with the focus on continuously improving production and quality processes. The company enjoys reliable partner tag for its components used as rolling stocks, defence and aerospace segments. As on August 28, 2025, it had orders on hand worth Rs.  375.89 cr. It has two advanced manufacturing facilities in Chennai, India capable of producing high precision forged and machined components. As of July 31, 2025, it had 281 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its book building route maiden IPO of 6507000 equity shares to mobilize Rs. 91.10 cr. (at the upper cap). The company has announced a price band of Rs. 133 – Rs. 140 per share of Rs. 10 each. The IPO opens for subscription on September 11, 2025, and will close on September 15, 2025. The minimum application to be made is for 2000 shares and in multiple of 1000 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.15% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 13.68 cr. for capex on purchase of machinery and equipment, Rs. 6.00 cr. for Repayment of certain outstanding borrowing, Rs. 59.27 cr. for working capital, and the rest for general corporate purposes.

The IPO is solely lead managed by GYR Capital Advisors Pvt. Ltd., while KFin Technologies Ltd. is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd., is the market makers. 

The company has issued initial equity shares at par, and issued/converted further equity shares in the price range of Rs. 12.50 – Rs. 300.00 per share between March 2005 and December 2024. It has also issued bonus shares in the ratio of 16 for 5 in March 2007, 8 for 1 in March 2011, 4.02 for 1 in July 2014, and 2 for 1 in August 2024. The average cost of acquisition of shares by the promoters is Rs. 1.20 and Rs. 1.26 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 17.46 cr. will stand enhanced to Rs. 23.97 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 335.58 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a standalone basis) posted total Income/Net Profit of Rs. 95.33 cr. / Rs. 1.49 cr. (FY23), Rs. 122.87 cr. / Rs. 14.23 cr. (FY24), Rs. 192.66 cr. / Rs. 25.56 cr. (FY25). Surge in bottom lines from FY24 onwards raise eyebrows and concern over its sustainability. 

On a consolidated basis, for FY25, the company posted a total income of Rs. 192.66 cr. with a net profit of Rs. 25.55 cr. 

For the last three fiscals, the company has reported an average EPS of Rs. 11.15, and an average RoNW of 20.60%. The issue is priced at a P/BV of 2.19 based on its NAV of Rs. 63.81 as of March 31, 2025, but its post-IPO NAV data is missing from IPO documents.

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 13.13, and based on its FY24 earnings, the P/E stands at 23.57. Thus, based on its recent financial data, the issue appears fully priced.

The company has posted PAT margins of 1.57% (FY23), 11.93% (FY24), 13.28% (FY25), and RoCE Margins of 11.31%, 26.42%, 26.28%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performances and future prospects.

COMPARISON WITH LISTED PEERS:
As per offer document, the company has shown Jupiter Wagons, Titagarh Rail Systems, as their listed peers. They are currently trading at a P/E of around 43.5, and 47.2 (as of September 08, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 46th mandate from GYR Capital in the last five fiscals (including the ongoing one). Out of last 10 listings, 1 opened at par, and the rest with premium ranging from 4.18% to 90.00 % on the date of listing.