There is a flurry of IPO listings in India which shows the trust of the economy on growing businesses that require funds to capitalize on the opportunities. Here we have Deepak Builders & Engineers who is into engineering and construction company looking to raise funds from the market.
About Deepak Builders IPO
Deepak Builders & Engineers India Limited is set to launch its Initial Public Offering (IPO) which consists of a fresh issue of Rs. 217.21 crore and an offer for sale of Rs. 42.83 crore, totaling 260.04 crore. The IPO is done by companies to raise funds for their various corporate purposes and even includes expansion and debt repayment. The offer will be conducted through a book-building process and is scheduled to open on October 21, 2024, and close on October 23, 2024, and is expected to be listed on the bourses dated 28th October 2024.
About Deepak Builders GMP
The shares of Deepak Builders & Engineers price in the grey market were trading at a 21.18% premium as of October 18th, 2024. The shares in Grey Market traded at Rs.246. This gives it a premium of Rs.43 per share over the cap price of Rs. 203.
About Deepak Builders (Overview and Business Model)
Deepak Builders was incorporated in 2017. The company specializes in construction and engineering services. Their business model focuses on construction and infrastructure projects as EPC services while offering both fixed-sum turnkey contracts and item-rate or percentage contracts.
As an engineering and construction company, the company has a track record of executing turnkey projects that include civil works, architectural and structural work, HVAC, electrical, mechanical, and plumbing services, public health services, modular operation theatres, information technology systems, medical gas pipeline systems, and external development work, including landscaping.
The company’s order book of Rs. 1,380.38 crore as of June FY25. Their order book consists of projects from Railways which contribute around 66.03%, industrial building projects from IOCL which contribute 25.05%, and the remaining 4.38% from hospital and medical projects from government-controlled entities. The book-to-bill ratio in FY24 stood at 2 times.
Deepak Builders Promoter
The promoters of Deepak Builders are Deepak Kumar Singal and Sunita Singal. They play a crucial role in the company’s direction and operational management.
Deepak Builders Selling Shareholders
The selling shareholders in the IPO include Deepak Kumar Singal: Offering 19,20,000 equity shares and Sunita Singal: Offering 1,90,000 equity shares. These shares will be sold as part of the offer-for-sale of the IPO.
Deepak Builders Lead Managers
The lead manager for the IPO is Fedex Securities Private Limited. Kfin Technologies Limited is the Registrar to the offer. They are responsible for managing the entire IPO process which includes pricing, marketing, and ensuring compliance with regulatory requirements.
Deepak Builders IPO’s Objectives of Offer
The objectives of the IPO which include Raising capital for expansion projects – 111.95 crore, Repaying existing debt – 30 crore, and Supporting general corporate purposes.
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Deepak Builders Financials
While specific financial details are not provided in the search results, The company’s revenue from operations stood at Rs. 511.40 crore in FY24, an 18% growth from Rs. 4,334.55 crore in FY23. Net Profits stood at Rs. 60.41 crore in FY24 which saw a nearly two-fold increase from Rs. 21.39 crore.
The lower cost of material cost YoY and higher revenue growth might have contributed to the net profit growth. The RoE stood at 49.09% in FY24 and improved from 26.05% in FY23. Despite an increase in debt, it is offset by an increase in reserves which helped the company to maintain its debt-to-equity ratio to 1 time.
Deepak Builders vs. Peers
A comparison of accounting ratios with peers can provide insights into Deepak Builders. Their peers are IRCON International, Ahluwalia Contracts, PSP Projects, and ITD Cementation. The RoE of Deepak Builders is higher than its peers, even in Net profit margin they are better. In Order book size, the Deepk builders are lower than their peers with PSP projects being the highest.
Strengths of Deepak Builders
- Deepak Builders established a strong market presence which shows its credibility with its clients and investors.
- The company maintains a diverse project portfolio while reducing its reliance on a single market segment.
- An experienced management team drives the company’s effective strategic planning and direction.
- The company carefully selects government projects that relate to its operations and executes them on time to secure more contracts in the future.
- Deepak Builders capitalizes on growth potential in the infrastructure sector which aligns with government initiatives.
Risks to Deepak Builders
- There is Intense market competition and that can put pressure on the profit margins.
- The projects from Punjab constitute around 31% of the total revenue and risks persist if there are any economic or social concerns impacting its growth.
- The Regulatory challenges might impact its operational efficiency and project timelines.
- The Dependence on government projects poses risks if the order is not awarded.
- As a capital-intensive business, there are risks regarding the funds required for the projects which can affect its operating cash flow.
Written by Santhos
Disclaimer
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