Deepak Builders IPO: A Promising Micro-Cap Investment Opportunity
The Indian IPO market is buzzing with activity, and one of the upcoming micro-cap companies to watch out for is Deepak Builders, a construction company set to launch its Initial Public Offering (IPO). Scheduled from October 21 to 23, Deepak Builders’ IPO follows closely on the heels of the Garuda Construction IPO, which recently made its debut in the market.
Company Overview
Deepak Builders operates in the construction sector, specializing in developing administrative, institutional, and industrial buildings, hospitals, residential complexes, stadiums, and more. The company offers a wide range of services, including architectural and structural work, fire-fighting systems, IT infrastructure, public health services, and landscape development. The company has already completed several notable projects in these domains.
Financial Performance
Deepak Builders has demonstrated impressive financial growth over the past few years:
- Revenue has surged by nearly 19%, from ₹364 crores to ₹516 crores.
- Profitability has seen a staggering 182% increase, with profits rising from ₹17.18 crores to ₹60 crores.
- The company boasts reserve surplus cash of around ₹124-138 crores, while managing borrowings effectively.
- Total assets stand at ₹641 crores, showcasing strong financial health.
In terms of valuation, Deepak Builders has a market capitalization of ₹945 crores, and its debt-equity ratio is a healthy 0.91, indicating a balanced financial structure. The company’s return on equity (ROE) is around 8-8.5%.
IPO Details
The Deepak Builders IPO aims to raise ₹260 crores, with a portion of the proceeds being used to repay debts and fund the company’s working capital requirements. The IPO will consist of a retail allocation of ₹35 crores, with one lot comprising 73 shares. The price band is expected to be around ₹112-120 per share, and the expected post-IPO EPS (Earnings Per Share) is ₹1.184.
Peer Comparison and Valuation
When compared to its peers in the construction industry, Deepak Builders offers a promising valuation:
- Rakan International: P/E multiple of 24 with an EPS of ₹9.
- PSP Projects: P/E multiple of 37 with an EPS of ₹13.
- Patel Engineering: P/E multiple of 19 with an EPS of ₹13.
Given the above comparisons, Deepak Builders comes to the market with a more attractive valuation, with its P/E multiple expected to range between 12-16. This makes it a potentially lucrative investment for those looking to capitalize on a micro-cap opportunity.
GMP and Allotment Insights
As of now, the Grey Market Premium (GMP) for Deepak Builders is around ₹6 per share, indicating a modest listing gain. However, market conditions can play a significant role in determining the final premium closer to the listing date. The allotment is expected to be competitive, with limited shares available in the retail category, meaning a small percentage of retail investors may receive allotments.
Conclusion: Should You Invest?
Deepak Builders’ IPO offers an attractive proposition, especially for investors looking to tap into the growth potential of the construction sector. The company’s solid financial performance, reasonable valuation, and strategic use of IPO proceeds for debt repayment and working capital make it a compelling option. However, as with any micro-cap IPO, the risk factors are higher, and investors should assess their risk tolerance before applying.
With limited allotments and a growing interest in the IPO market, Deepak Builders could offer decent returns, but it’s important to stay cautious and monitor market conditions closely.
For those with funds left after investing in larger IPOs like War Energies, Deepak Builders presents an exciting secondary opportunity in the IPO landscape.
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