Deepak Builders IPO opens today: GMP up 30%; should you park you money?

Deepak Builders IPO opens for public subscription with a GMP of 30 per cent from the upper end of issue price: Should you subscribe? Here's what brokerages recommend

Deepak Builders IPO: The initial public offering (IPO) of Deepak Builders & Engineers India opens for public subscription today. Deepak Builders & Engineers' IPO is a book-built issue of Rs 260.04 crore, which comprises a fresh issue of 10,700,000 shares and an offer for sale of 2,110,000 shares with a face value of Rs 10 apiece. 

Deepak Builders stated that it has already raised Rs 78.01 crore from anchor investors on the bidding concluded on October 18, 2024.

The public issue of Deepak Builders is available at a price band of Rs 192-203, with a lot size of 73 shares. Accordingly, investors can bid for a minimum of 73 shares and in multiples thereof.

 

Meanwhile, the unlisted shares of Deepak Builders are trading at a premium of Rs 60 or a 29.56 per cent gain against the upper end of the IPO price of Rs 203, reveals sources tracking the grey market activities.

The subscription window to bid for Deepak Builders IPO is set to conclude on Wednesday, October 23, 2024. Following that, the basis for the allotment of Deepak Builders IPO shares is likely to be finalised on Thursday, October 24, 2024.

Deepak Builders' shares are slated to make their debut on the bourses on Monday, October 28, 2024, by listing on the BSE and NSE.

The company proposes to utilise the proceeds from the IPO for the repayment/prepayment, in full or part, of certain borrowings availed by the company, as well as for funding working capital requirements and general corporate purposes.

Anand Rathi Research - Subscribe

Analysts at the Anand Rathi Research Team have assigned a 'Subscribe' rating on the Deepak Builders IPO, citing its strong market presence, which shows its credibility in the EPC segment. The company has a diversified project portfolio, reducing its reliance on a single market segment. As of June 2024, the company has some litigations related to projects amounting to Rs 88.40 crore (6 per cent of the total order book). The analysts believe that the liability should not impact the company's profitability as a going concern. 

With a strong order book, Deepak Builders has visible growth potential in the infrastructure sector, aligning with government initiatives.

At the upper price band, the company is valued at a P/E of 15.6x with a market cap of Rs 9,455 million post-issue of equity shares and a return on net worth of 52.9 per cent. On the valuation front, the analysts believe the company is fairly priced.

Swastika Investment - Subscribe for long-term

Swastika Investment, in its research note, has recommended investors subscribe to the Deepak Builders IPO for the long term, citing consistent growth in revenue and profitability. According to the brokerage, the issue is priced at a fair valuation. However, geographical concentration, high competition, and government dependence could pose risks.

"Consider long-term investors seeking exposure to the Indian construction sector, with careful due diligence," said Swastika Investment in its research note.

About Deepak Builders & Engineers India

Deepak Builders & Engineers India (DBEL) is an integrated engineering and construction company, specialising in the execution and construction of administrative & institutional buildings, hospitals and medical colleges, industrial buildings, historical memorial complexes, stadiums and sports complexes, residential complexes, and various developmental and other construction activities.