Another IPO with strong fundamentals - Should you subscribe?
In this analysis, we take a closer look at Deepak Builders & Engineers India Ltd and present you with the exclusive IPO details.
About the Issue:
Deepak Builders & Engineers India Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
October 21, 2024 |
| IPO Closing Date |
October 23, 2024 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Rs 10 per equity share |
| IPO Price |
Rs 192 to Rs 203 per equity share |
| Min Order Quantity |
73 shares |
| Listing At |
BSE, NSE |
| Total Issue |
12,810,000 shares of FV Rs 10* |
| (Aggregating up to Rs 260.04 Cr)* |
| Fresh Issue |
10,700,000 shares of FV Rs 10* |
| (Aggregating up to Rs 217.21 Cr)* |
| Offer for Sale |
2,110,000 shares of FV Rs 10* |
| (Aggregating up to Rs 42.83 Cr)* |
| QIB Shares Offered |
50% of the Offer |
| Retail Shares Offered |
35% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:
1. Repayment/prepayment, in full or part, of certain borrowings availed by the company.
2. Funding of working capital requirements of the company.
3. General corporate purposes.
Promoter holding
Deepak Kumar Singal and Sunita Singal are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 100 per cent in the company.
Company profile
Deepak Builders & Engineers India Ltd is an integrated engineering and construction firm, specializing in the development of administrative and institutional buildings, hospitals, medical colleges, industrial facilities, historical memorials, stadiums, sports complexes, residential complexes, and various other construction projects. The company has also expanded into specialized structural works, such as flyovers, rail underpasses and overpasses, approach roads, and the redevelopment of railway stations.
With a solid track record in executing turnkey projects, the company’s expertise spans architectural and structural works, civil engineering, HVAC, Mechanical, Electrical & Plumbing (MEP) systems, firefighting and fire alarm systems, public health services, IT infrastructure, modular operation theatres, medical gas pipelines, and external development, including landscaping.
Operating across four states—Punjab, Haryana, Rajasthan, and Uttarakhand—as well as two Union Territories—Chandigarh and the National Capital Territory of Delhi—the company is accredited as a Class I (Super) Contractor by the Central Public Works Department, Government of India. This accreditation qualifies it to independently bid on projects with a tender value of up to Rs 650 crore. As of June 30, 2024, the company is managing twelve active projects, including seven EPC contracts and five item-rate/percentage-rate contracts, with an order book valued at Rs 1,380 crore.
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Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
Q1FY25 |
| Revenue |
365 |
435 |
517 |
106 |
| Profit before tax |
24 |
29 |
82 |
23 |
| Net profit |
18 |
21 |
60 |
14 |
The company has consistently delivered robust growth in both revenue and profits over the past few years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of around 19 per cent in revenue and 83 per cent in net profit.
When annualized, the figures from the June quarter show a decline, which is expected due to the seasonal impact on construction activities. Intense heatwaves and the onset of the monsoon typically slow down operations, as both companies and the government reduce infrastructure spending during these periods. The company is expected to deliver strong performance for the full fiscal year 2025, supported by its robust order book and the progress of its ongoing projects.
Valuation & Outlook
| Company Name |
P/E |
P/B |
RoE (%)* |
| Deepak Builders & Engineers India Ltd |
13 |
4.68 |
49 |
| Listed Peers |
| Ircon International Ltd |
21 |
3.37 |
17 |
| Ahluwalia Contracts (India) Ltd |
22 |
4.71 |
27 |
|
PSP Projects Ltd
|
21 |
2.15 |
14 |
|
ITD Cementation India Ltd
|
31 |
6.19 |
20 |
*RoE: Based on FY24 data
The issue is priced with a P/BV ratio of 4.68 times, calculated using its Net Asset Value (NAV) of Rs 43.42 as of June 30, 2024. When we calculate the PE ratio for the company by considering the annualized FY25 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 13.
The company achieved an impressive 49 per cent return on equity (RoE) and 33 per cent return on capital employed (RoCE) for FY24. The company has significantly outperformed its listed peers by delivering superior performance in both valuation and returns.
Given its diverse offerings, solid order book with a strong government client base, and proven financial track record, we recommend subscribing to the issue with a long-term investment outlook, acknowledging its significant growth potential.