Deepak Builders & Engineers IPO analysis

Deepak Builders & Engineers IPO (initial public offering) will open for subscription on October 21, 2024 and close on October 23, 2024. Below is a breakdown of the infrastructure company's strengths, weaknesses and growth prospects to help investors make an informed decision. Deepak Builders & Engineers IPO in a nutshell Quality: Between FY22-24, Deepak Builders & Engineers reported a three-year average ROE and ROCE of 35 and 33 per cent, respectively. Growth: During FY22-24, its revenue and net profit grew by 19 and 85 per cent per annum, respectively. Valuation: Post-listing, the stock will trade at a P/E and a P/B ratio of 15.7 and 2.5 times, respectively. Overview: Sectoral tailwinds support the company's growth prospects. The government's focus on railways and infrastructure development will help the company scale up. However, price-based competition with a wide number of players in the market poses a threat to its prospects. About Deepak Builders & Engineers Deepak Builders & Engineers is an Engineering, Procurement, and Construction (EPC) company, which executes large-scale infrastructure and construction projects, particularly in the railway sector. It builds railway bridges and also undertakes development and redevelopment of railway stations. Its other construction projects include administrative and institutional buildings, hospitals and flyovers, among others. The company had orders worth Rs 1,380 crore as of FY24, of which 66 per cent were from the railways. Strengths of Deepak Builders & Engineers Strong order book: The company's order book of Rs 1,380 crore is nearly three times its FY24 revenue, providing solid visibility for the business. Between FY22 and FY24, the company almost doubled its order book, demonstrating its strong execution capabilities and consistent success in securing government contracts. Weaknesses of Deepak Builders & Engineers Geographical concentration: The company's revenue is geographically concentrated, with 33 per cent coming from Punjab alone, exposing it to regional risks. High dependence on government contracts: The company's order book entirely consists of contracts awarded by the government. A slowdown in government spending can significantly dent the business. Deepak Builders & Engineers IPO details Total IPO size ( Rs Cr) 260 Offer for sale (Rs Cr) 43 Fresh Issue (Rs Cr) 217 Price Band (Rs) 192-203 Subscription dates October 21-23, 2024 Purpose of issue To repay borrowings and fund working capital Post-IPO M-cap (Rs cr) 946 Net worth (Rs cr) 373 Promoter holding (%) 72.5 Price/earnings ratio (P/E) 15.7 Price/book ratio (P/B) 2.5 Financial history Key financials 2Y growth (% pa) FY24 FY23 FY22 Revenue (Rs cr)