The initial public offering (IPO) of Deepak Builders & Engineers India opens for bidding today, that is Monday, October 21 and the issue can be subscribed till Wednesday, October 23. The construction company shall be offering its shares in the range of Rs 192-203 apiece, for which investors can apply for a minimum of 73 equity shares and multiples thereafter.
Deepak Builders & Engineers India, incorporated in September 2017, is a construction company specializing in administrative, institutional, and industrial buildings, hospitals, stadiums, residential complexes, and other construction activities. Its business can be categorized into construction projects; infrastructure projects business; and sale of products.
The Rs 260.04 crore IPO of Deepak Builders & Engineers included a fresh share sale of 1,07,00,000 shares worth Rs 217.21 crore, and an offer-for-sale (OFS) of up to 21,10,000 shares by its promoters. The net proceeds from the fresh issue shall be utilized towards repayment/prepayment of certain borrowings; funding of working capital requirements; and general corporate purposes.
Brokerage firms mostly are positive on the small issue and suggest subscribing to it for a long-term basis. They are positive on the company's strong presence, decent financial and expansion plans in the future. However, high competition, geographical concentration and ongoing litigations are the major concerns for the issue.
Deepak Builders established a strong market presence which shows its credibility in the EPC segment. The company has a diversified project portfolio which reduces its reliance on a single market segment, said Anand Rathi Research. "We believe that the liability of this should not impact on the going concern of the company's profitability," it said.
With a strong order book, Deepak Builders has a growth potential visibility in the infrastructure sector which aligns them with government initiatives. At the upper price band, the company is valuing at P/E of 15.6 times with a market cap of Rs 945.5 crore post issue of equity shares, Anand Rathi said. "We believe that the company is fairly priced, " it added with a 'subscribe' rating.
Ahead of its IPO, Deepak Builders & Engineers India raised Rs 78.01 crore from five institutional investors via anchor book by allocating them 8,42,939 equity shares at Rs 203 apiece. Anchor book included names like Neomile Growth Fund, Citadel Capital Fund, Saint Capital Fund, Zeal Global Opportunities Fund, and Elite Capital Fund.
Deepak Builders has completed turnkey projects encompassing architectural, structural, civil, MEP, firefighting systems, public health services, IT systems, operation theaters, medical gas pipelines, and landscaping. It has completed construction and infrastructure projects in four states- Punjab, Haryana, Rajasthan, Uttarakhand - and two union territories- Chandigarh and Delhi.
Deepak Builders is a growing engineering and construction company in northern India, with consistent growth in revenue and profitability, said Swastika Investmart. "However, geographical concentration, high competition, and government dependence could be a risk but the issue is priced at a fair valuation. Investors may consider long-term exposure with careful due diligence," it said.
Deepak Builders & Engineers reported a net profit of Rs 14.21 crore with a revenue of Rs 106.34 crore for the quarter ended June 30, 2024. The EPC player clocked a net profit of Rs 60.41 crore with a revenue of Rs 516.74 crore for the financial year ended on March 31, 2024.
By leveraging its in-house integration for design, engineering, and project management, the company aims to increase efficiency and reduce reliance on third-party contractors, targeting larger contracts, including major NHAI road and airport construction projects, said StoxBox in its IPO note.
"The current issue is priced at a P/E of 12.1 times on the upper band based on FY24 earnings and is relatively lower than peers. With a proven track record of 76 completed projects and class I (Super) contractor accreditation, Deepak Builders is well-positioned for future expansion" it added with a 'subscribe' rating for the issue, with a medium to long-term investment.
Deepak Builders & Engineers India has reserved 50 per cent of the net offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) have 15 per cent of the allocation. Retail investors will get the remaining 35 per cent.
Fedex Securities is sole book running lead manager of the Deepak Builders & Engineers IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with Monday, October 28 as the tentative date of listing.