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Industry : Construction – Real Estate

Deepak Builders and Engineers India Limited View all IPOs

Price Band

Rs 192 – Rs 203

Deepak Builders and Engineers India Limited is going public with a fresh issue and an offer for sale. The issue opens on 21st October 2024.

MOJO CALL

Why

MOJO CALL

Avoid

Neutral

Lean Operations

The company operates with a lean business model, achieving the highest operating margins in its industry. By keeping manufacturing and employee costs notably lower than its competitors, the company has maintained an edge. A significant portion of its workforce, 77%, is made up of third-party contract labor, further contributing to cost efficiency.

Strong Order Book

As of June 30, 2024, the company holds a strong order book of ₹1,380 crore, reflecting a 24% increase compared to FY2024. These orders include major projects from Railways and Indian Oil. The company has maintained a healthy book-to-bill ratio of 2.00 for FY2024, down from 4.05 in FY2023 and 2.11 in FY2022, showcasing its strong execution capabilities.

Increasing Competitive intensity

The industry is becoming increasingly competitive, with low entry barriers and a growing number of both domestic and international competitors. During the June 2023 quarter, the company secured only one out of the four projects it applied for. In FY2024, the company submitted bids for four projects but failed to win any.

Valuations

Based on the FY2024 financials, the company aims for a P/E ratio of 15.7x and a market cap-to-sales ratio of 1.56x. Although the company is smaller than its listed competitors, it operates with stronger margins and has delivered the highest return on equity. We believe the downside risk is limited and therefore, recommend subscribing to the issue.

Issue Details

Issue Opens	21st October 2024
Issue Closes	23rd October 2024
Price Band	Rs 192 – Rs 203
Issue size (Upper Band)	Rs. 260.04 Cr
Issue Type	FRESH ISSUE & OFFER FOR SALE
Market cap (based on upper band)	Rs. 945.59 Cr
Sales- March 2024 (Rs./Crs)	603.43 Cr
Net Profit - March 2024 (Rs./Crs)	60.41 Cr
Industry	Construction – Real Estate
Promoters	DEEPAK KUMAR SINGAL AND SUNITA SINGAL
Lead Manager	Fedex Securities

Objective of the Issue

Details

Objectives of the Issue Fresh Issue – Rs 217.21 cr & Offer for Sale – Rs 42.83 cr

The Objectives of the Offer are for:
1. Repayment/prepayment, in full or part, of certain borrowings availed by the company – Rs 30 crore
2. Funding the working capital requirements of the company – Rs 111.96 crore
3. General corporate purposes – Rs 75.25 crore

List of Shareholders Selling Their Stake

Name	Type	Value of Shares (in Rs)	% of OFS
Deepak Kumar Singal	Promoter	38,97,60,000	91%
Sunita Singal	Promoter	3,85,70,000	9%

Business Operations

About Company

Deepak Builders and Engineering India is an engineering and construction company, specializing in the construction of administrative & institutional buildings, hospitals and medical colleges, industrial building, historical memorial complex, stadium and sports complex, and residential complex.

The company has also ventured into building flyovers, roads and bridges, and redevelopment of railway stations.

The company operates under two business models – EPC as well as item-rate basis. The company also earns from the sale of residual construction material.

Currently, the company has 12 ongoing projects, including 7 EPC projects and 5 item-rate basis projects.

As of 30th June 2024, the company had an outstanding order book of Rs 1,380 crore. Out of the total order book, Railway projects contributed 66% whereas the Indian Oil project contributed to 25%.

Segment Revenue Breakup

Revenue Breakdown by Segment:
Project Mix	Q1FY2025	FY2024	FY2023	FY2022
EPC projects	45%	41%	19%	21%
Item-rate basis projects	30%	51%	61%	62%
Sale of residual products	25%	8%	20%	17%

Financials

Financial Overview

The company’s revenue grew by 41% between FY2022 and FY2024 and stood at Rs 511.40 crore for FY2024. The company recorded revenues of Rs 105 crore in Q1FY2025.

In FY2024, the company’s Return on Net Worth stood at 39.4%, an improvement compared to 23.06% and 24.72% in FY2023 and FY2022, respectively.

For Q1FY2025, the operating margins for the company stood at 28.75%, an improvement from 21.94% recorded in FY2024 and 11.74% recorded in FY2023.

The company has managed its debt well with net debt-to-equity ratio coming down to 1.30x in FY2024, compared to 1.81x recorded in FY2022.

The company has not been able to generate positive cash flow from operations in FY2024. The company reported a CFO of (negative) Rs 26.8 crore in FY2024. Although, the company reported a CFO of Rs 6.43 crore in Q1FY2025.

As of 30th June 2024, the company had a debt of Rs 156.72 crore (including lease liabilities).

Financial Performance (Rs/crore)

Rs./Crs	Q1FY 25	FY 24	FY 23	FY 22
Revenue	105.11	511.40	433.45	363.05
Net Profit	14.21	60.41	21.39	17.66