DEE Development Engineers Ltd IPO | News | Overview | Verdict

IPO listed on 26 Jun'24

DEE Development Engineers Ltd

Minimum Investment

₹ 14,819 / 73 shares

Grey market premium

₹ 80 (39% premium)

Issue price

₹ 203

Listing price

₹ 339

Listing day %

65%

Listing on

Jun 26, 2024

Our Verdict:

The process piping market in India is projected to grow significantly, from ~Rs 25,400 crore in FY2023 to ~Rs 38,400 crore by FY2030. DEE, with its strategic expansion plans, strong customer base and industry expertise, is well-positioned to capitalize on this opportunity.
Moreover, management is optimistic about growth prospects from the replacement market, as many process plants in India are aging and due for refurbishment, offering a substantial growth opportunity.
From a financial perspective, the firm has allocated Rs 175 crore from its net proceeds towards debt repayment, which is anticipated to strengthen the balance sheet, reduce interest costs, and consequently boost net earnings and return ratios. Considering these factors, investors may consider subscribing to the IPO from a medium-to-long term perspective.

About the company

Founded in

21 Mar'88

Managing director

Krishan Lalit Bansal

DEE Development Engineers Ltd (DEE) offers specialized process piping solutions tailored for a range of sectors, including oil and gas, power (including nuclear power), chemicals, and other process industries. This is achieved through a combination of engineering, procurement, and manufacturing services.
The firm operates through seven manufacturing facilities strategically positioned across India and Thailand, boasting a total installed capacity of 70,875 MT. It manufactures and supplies a diverse range of products, including industrial pipe fittings, pressure vessels, modular skids, high-frequency induction pipe bends, high-pressure piping systems, piping spools, longitudinally submerged arc welding pipes, and associated accessories.

STRENGTHS

Market Leadership: DEE is the largest player in India for process piping solutions in terms of installed capacity and is also recognized as a top provider of process pipe solutions globally, known for its ability to handle complex needs across various industries.
Impressive Financial Performance: DEE has shown consistent financial growth, with a Compound Annual Growth Rate (CAGR) of 10% in operational revenue from FY21 to FY23. During this time, EBITDA increased by 14%. While net profit initially declined from Rs 14.2 crore to Rs 13 crore, it recovered to Rs 14.3 crore in the first nine months of FY24.
Robust Order Book: DEE maintains a strong order book, which has expanded at a CAGR of 30% since FY21, amounting to Rs 563.35 crore in FY23 and surging to Rs 828.70 crore in the first nine months of FY24. This growth ensures substantial revenue visibility moving forward.
Marquee Clients: DEE boasts a diverse clientele that includes top domestic and international firms, some of which are Fortune 500 companies and various multinational corporations. Notable clients include JGC Corporation, Nooter Eriksen, MAN Energy Solutions SE, Mitsubishi Heavy Industries, John Cockerill S.A, as well as Indian giants like Reliance Industries, Thermax Babcock & Wilcox Energy Solutions, HPCL–Mittal Energy, and Toshiba JSW Power Systems.

RISK FACTORS

Customer Dependence: A significant portion of DEE's revenue comes from its top 10 customers—about 66% and 71% during 9MFY24 and FY23, respectively. The lack of long-term contracts with these key customers presents a risk of potential sales disruptions, which could harm its financial and operational performance.
Subsidiary Losses: DEE’s subsidiaries have reported losses over the past three fiscal years. Continued losses could negatively impact its business prospects, financial health, cash flow, and operational results.
High Debt Levels: As of April 2024, DEE has a significant debt amounting to Rs 386.19 crore, which requires considerable cash flow for servicing and restricts its ability to operate freely. Failing to meet the terms of financing agreements or to manage repayments and other conditions could negatively affect its business operations, financial condition, cash flow, and credit rating.
Valuations: The IPO seems aggressively priced with a Price-to-Earnings (P/E) ratio of 73x based on projected FY24 earnings post-IPO. Despite this, a healthy grey market premium (GMP) indicates a strong market debut.

Financials

All Values are in Cr.

Issue details

Issue type

Mainstream

Issue size

₹ 418.01 crore

Fresh Issue

₹ 325 crore

OFS

₹ 93.01 crore

Price range

₹ 193 - 203

Lot size

73 shares

Issue Objective

DEE intends to utilise the net proceeds from the fresh issue towards:

Financing its working capital requirements;
Prepayment or repayment of certain outstanding borrowings; and
General corporate purposes.

Dates

Bidding open

19 Jun'24

Bidding close

21 Jun'24

Allotment date

24 Jun'24

Refund date

25 Jun'24

Listing

26 Jun'24

IPO Reservations

Qualified institutional buyers

<50%

Non-institutional investors

>15%

Retail individual investors

>35%

Read the Offer Document

This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.

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