Deepak Builders IPO subscribed over 30x on Day times so far, NII quota booked 61 times

The initial public offering (IPO) of Deepak Builders & Engineers India continued to see a thistrong response from the investors during the third and final day of the bidding process. The issue was overall booked more than 4 times on day one and ended day two with over 12 times bidding.

New Delhi-based Deepak Builders & Engineers is selling its shares in the price band of Rs 192-203 apiece. Investors can apply for a minimum of 73 shares and its multiples thereafter. It is looking to raise Rs 260 crore via IPO, which includes a fresh share sale of Rs 217.21 crore and an offer-for-sale (OFS) of up to 21.10 lakh equity shares.

According to the data from BSE, the investors made bids for 26,91,05,156 equity shares, or 30.01 times, compared to the 89,67,061 equity shares offered for the subscription by 2.25 pm on Wednesday, October 23. The three-day bidding for the issue, which opened on Monday, October 21, concludes today.

The allocation for non-institutional investors (NIIs) was subscribed 61.17 times, while the portion reserved for retail investors saw a subscription of 31.58 times. However, the quota set aside for qualified institutional bidders (QIBs) quota saw bids for 3.89 times for their allocations as of the same time.

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 grey market premium (GMP) for Deepak Builders & Engineers India has remained stable on the back of strong demand. Last heard, the company was commanding a premium of Rs 60-62 in the unofficial market, suggesting a listing pop of more than 30 per cent for the investors.

Brokerages have a positive view on the issue and suggest subscribing for a long term on the back of rising market demand, governments push on infra, strong order book and robust growth potential. However, dependence on government for orders, delays in projects, revenue from select clients and geographical concentration are the major risks for the company.

The quantum jump in bottom lines for FY24 raise eyebrows and concern over its sustainability going forward. Its net debt/Ebitda ratio at 4.83 as of June 30, 2024 raises concern, said Bajaj Broking. "If we attribute FY25 annualized super earnings to its post- IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 16.64 times," it said with a 'subscribe for long term' rating.

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.

Ahead of its IPO, Deepak Builders raised Rs 78.01 crore from five anchor investors by allocating them 8,42,939 at Rs 203 apiece. 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.

The company’s focus on sustainable construction practices and ecofriendly solutions aligns with its dedication to minimizing environmental impact and contributing to India’s infrastructure development in a responsible manner, said Ventura Securities' IPO note.

With a strong network of suppliers, subcontractors, and project partners, Deepak Builders ensures the smooth execution of projects across various regions of the country. Its client-centric approach has positioned Deepak Builders as a leader in the Indian construction industry, playing a key role in the nation’s rapid urbanization and industrial growth, it said with 'subscribe' tag.

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.