Diffusion Engineers Plans To Double Capacity With IPO Proceeds

Diffusion Engineers Ltd. plans to double its existing capacity through the funds raised via its initial public offering, the company's management said after its shares made their market debut on Friday.

Speaking to NDTV Profit, Diffusion Engineers chairman and managing director Prashant Garg said that the company is already at 85–90% levels of capacity utilisation at present, and the capex from the funds will help them scale it up.

“What also happens is that when you have associated equipment in a bigger space, you tend to get better utilisation, and the manufacturing capacities get freed up and generated. We expect a minimum double capacity, and it may be higher as well,” he explained.

Shares of Diffusion Engineers were listed at a premium of 15.18% on the National Stock Exchange at Rs 193.50 apiece and soon hit the upper circuit of 5%.

The shares were listed at a premium of 11.9% on the BSE at Rs 188 apiece.

Explaining the company's plans regarding the utilisation of IPO proceeds, Diffusion Engineers chief financial officer Abhishek Mehta said that they will deploy the funds to fuel expansion.

“We will be increasing our capacity in our existing heavy engineering division. We will also be doing an expansion in our electrodes division. These are the two things we will be doing with the funds we have raised and our expansion will start immediately in some time,” he said.

With the capacity being doubled, the production of the company is also expected to increase after a year, Mehta said.

“This will help us increase our topline. We expect that to be in double digits in the next two to three years,” he added.

“Our margins improved because of our lower direct cost and we expect it to remain the same level in the years to come,” the CFO further noted.

Garg, meanwhile, said that Diffusion Engineers did not have any plans for an additional fundraiser in the coming years.

“We have strong operating cashflows so we think that whatever incremental capex will be needed in the years to come we will be able to fund that through internal accruals,” he said.

Shares of Diffusion Engineers Ltd. ended the session 5% higher at Rs 203.17 apiece on the NSE compared to the benchmark Nifty 50's decline of 0.79% on Friday.

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