Deepak Builders & Engineers IPO: All You Need To Know About Upcoming Rs 260 Crore Issue; GMP & More

Deepak Builders & Engineers India, an engineering and construction company, is set to launch its initial public offering (IPO) on Monday, October 21. The IPO will be open for subscription for a brief window of three days, concluding on October 23, 2024. Ahead of the public bidding, the allocation to anchor investors will take place on Friday, October 18. With the company looking to raise Rs 260 crore, this offering is garnering interest among investors.

IPO Details and Price Band

The Punjab-based construction firm has fixed a price range of Rs 192 - 203 per share for its maiden IPO, with a face value of Rs 10 per share. The offering includes the issuance of 10.7 million new equity shares, in addition to 2.11 million shares offered through an offer-for-sale (OFS). The OFS portion will see participation from the company's majority owners, Deepak Kumar Singal and his spouse, who currently hold almost 100% ownership in the firm.

Fedex Securities Pvt Ltd will serve as the book-running lead manager for the IPO, while Kfin Technologies Ltd has been appointed as the registrar. The allocation of shares is distributed as follows: 50% of the offer is reserved for qualified institutional buyers (QIBs), 15% for non-institutional investors (NIIs), and 35% for retail investors.

For potential investors, there are several key takeaways from the company's Red Herring Prospectus (RHP) that provide deeper insights into Deepak Builders & Engineers' business, financials, and growth prospects.

Promoters and Ownership

The company's promoters, Deepak Kumar Singal and Sunita Singal, hold significant ownership, with nearly full control over the firm. Their participation in the OFS signals a partial dilution of ownership.

Peer Comparison

In its RHP, the company lists several industry peers, providing valuable benchmarks for investors. Notable peers include:

IRCON International Ltd: P/E ratio of 24.67
Ahluwalia Contracts (India) Ltd: P/E ratio of 19.25
PSP Projects Ltd: P/E ratio of 19.16
ITD Cementation Ltd: P/E ratio of 37.04

Business Focus

Deepak Builders & Engineers India Limited specializes in a wide array of construction projects, ranging from administrative, institutional, and industrial buildings to hospitals, stadiums, and residential complexes. The company boasts a strong track record of successfully completing turnkey projects that include architectural, structural, civil, and mechanical engineering services. Their expertise also extends to medical gas pipelines, public health services, firefighting systems, and landscaping.

Ongoing Projects

The company is currently managing 12 active projects, which include seven EPC (Engineering, Procurement, and Construction) contracts and five item rate/percentage rate contracts. These projects span across sectors such as healthcare (hospitals and medical colleges), administrative and industrial buildings, as well as infrastructure developments like road and railway station upgrades.

Key Clients

Deepak Builders & Engineers has a strong client portfolio, including names such as Northern Railways, PWD Punjab, PWD Haryana, PWD Uttarakhand, WAPCOS, IOCL, GMADA Punjab, and Ludhiana Smart City Limited (LSCL).

Financial Performance

Deepak Builders & Engineers has shown impressive financial growth in recent years. For the financial year ending March 31, 2024, the company reported a 19% increase in revenue, with an 182% surge in profit after tax (PAT) compared to the previous fiscal year.

As of June 30, 2024, the company's order book for fiscal 2024 stands at Rs 13,803.89 million. The order book is primarily driven by railway projects (66.03%), industrial building projects awarded by IOCL (25.05%), and hospital and medical projects (4.38%) from government-controlled entities.

Risks and Challenges

While the company's growth prospects look promising, there are certain risks that investors should consider:
Geographical Concentration: The company's operations are heavily concentrated in Punjab. Any adverse changes in the region's policies, laws, or economic environment could impact their business significantly.
Project-Dependent Portfolio: Deepak Builders & Engineers is reliant on specific key projects. Any delays or setbacks in these major contracts could affect their financial performance.
Cash Flow Challenges: In the past, the company has experienced negative cash flows from its operating activities. Future fluctuations in earnings or operating losses could potentially lead to financial stress.

Anchor Investor Lock-In

For anchor investors, 50% of the shares allocated will be locked in for 90 days from the date of allotment, while the remaining 50% will be locked in for 30 days.