The initial public offering (IPO) of DEE Development Engineers continued to see a strong response from the investors during the second day of the bidding process. After being fully subscribed 2.51 times on the first day itself, the issue continued to attract investors from employees, retail and HNI categories.
The Faridabad-based DEE Development Engineers is selling its shares in the price band of Rs 193-203 apiece. Investors can apply for a minimum of 73 and its multiples thereafter. It is looking to raise Rs 418.01 crore via IPO, which includes a fresh share sale of Rs 325 crore and an offer-for-sale (OFS) of 45.82 lakh equity shares.
According to the data, the investors made bids for 10,53,17,027 equity shares, or 7.05 times, compared to the 1,49,44,944 equity shares offered for the subscription by 3.00 pm on Thursday, June 20. The three-day bidding for the issue will conclude on Friday, June 21.
The allocation for retail investors was subscribed 7.15 times, while the portion reserved for non-institutional investors saw a subscription of 15.83 times. However, the quota set aside for qualified institutional bidders (QIBs) quota was booked only 7 per cent times, while the employee portion was booked 13.72 times as of the time.
Founded in 1988, DEE Development Engineers is an engineering company that provides specialized process piping solutions for oil and gas, power including nuclear, chemicals, and other process industries through engineering, procurement, and manufacturing, among others.
The grey market premium of DEE Development has surged sharply on a back of strong interest from the investors during the bidding so far. Last heard, the company was commanding a premium of Rs 98-100 in the unofficial market, suggesting a listing pop of about 48-50 per cent for the investors. However, the premium in the grey market stood around Rs 80 a day earlier.
Brokerage firms are mostly positive on the issue suggesting investors to subscribe to it on the back of entry barriers in the industry, niche product segment, experienced management and robust growth potential. However, they see a small order book, big debt and aggressive pricing for the issue as key concerns for the issue.
Largest client contributed to 12.46 per cent of revenues and 40 per cent of revenues come from business outside India. The topline has grown at 13.7 per cent CAGR from FY21 to FY24 Looking at the operating performance, margin profile and orderbook, the company trades 70.3 times PE, 73.3 times FY24 PE and 17.9 times FY24 EV/Ebitda, said Arihant Capital Markets.
The company has an operational capacity of 94,500 tonnes per annum and adding another 9,000 tonnes in its Anjar facility. Post issue, company will have a net debt of Rs 2,191.18 crore. The use of proceeds are mainly to pay off debt of Rs 175 crore and fund the working capital requirements of the company, it added with a 'subscribe for listing gains' rating.
Dee Development Engineers mobilised Rs 125.1 crore from anchor investors as it has allotted 61.63 lakh equity shares to 19 funds at Rs 203 apiece. It reported a net profit of Rs 14.34 crore with a revenue of Rs 380.23 crore for the nine months ended on December 31, 2023. The company's net profit came in at Rs 12.97 crore with a revenue of Rs 614.32 crore for the FY23.
Dee Developers provides a wide range of piping products primarily for the oil and gas sector and has a good track record of executing projects and creating value for its shareholders, said Master Capital Service in its IPO note.
"The company is looking to use the IPO proceeds to reduce their debt and fund their working capital requirements for future growth. The company has a decent order book and an experienced management. We advise to subscribe to the IPO for listing gains," it added.
DEE Development has reserved shares worth Rs 1 crore for the eligible employees of the company, who will get a discount of Rs 19 per share. It has reserved 50 per cent of the issue for the qualified institutional bidders (QIBs), while non-institutional investors have 15 per cent of the net offer. Remaining 35 per cent of the net offer shall be allocated towards retail investors.
Equirus Capital and SBI Capital Markets are the book running lead managers of the DEE Piping Systems IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with June 26, Wednesday as the tentative date of listing.
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