DEE Development Engineers is launching its initial public offering (IPO) for bidding starting on Wednesday, June 19, and it will be available for subscription until Friday, June 21. The company has set a fixed price range of Rs 193-203 per share, with investors required to apply for a minimum of 73 equity shares and then in multiples of 73 shares. Established in 1988, DEE Development Engineers is an engineering firm that offers specialized process piping solutions for industries such as oil and gas, power (including nuclear), chemicals, and other process sectors, providing services in engineering, procurement, and manufacturing, among others.

DEE Development Engineers aims to raise a total of Rs 418.01 crore through its IPO. This includes a fresh issue of shares worth up to Rs 325 crore and an offer-for-sale (OFS) of up to 45,82,000 equity shares by promoter Krishan Lalit Bansal, totaling Rs 93.01 crore.

The company plans to use the net proceeds from the fresh issue to fund its working capital needs, prepay or repay a portion of its outstanding borrowings, and for general corporate purposes. The net proceeds from the OFS will go to the selling shareholder.

DEE Development Engineers raised Rs 125.1 crore from anchor investors by allocating 61.63 lakh equity shares at Rs 203 each to 19 funds. Among the investors were Citigroup Global Markets Mauritius, Morgan Stanley Asia (Singapore) Pte, Aurigin Master Fund, Pinebridge Global Funds, SBI General Insurance, and several mutual funds.

The company manufactures and supplies a variety of piping products, such as high-pressure piping systems, piping spools, high-frequency induction pipe bends, longitudinally submerged arc welding pipes, industrial pipe fittings, pressure vessels, industrial stacks, modular skids, and accessories including boiler superheater coils, desuperheaters, and other customized components.

DEE Development Engineers operates seven manufacturing facilities located in Palwal, Haryana; Anjar, Gujarat; Barmer, Rajasthan; Numaligarh, Assam; and Bangkok, Thailand, with three facilities in Palwal, Haryana. The company has also recently ventured into a new business segment, providing design, engineering, fabrication, and manufacturing of pilot plants at the Palwal facility.

DEE Development Engineers reported a net profit of Rs 14.34 crore and a revenue of Rs 380.23 crore for the nine months ending December 31, 2023. For the fiscal year 2022-23, the company achieved a net profit of Rs 12.97 crore with a revenue of Rs 614.32 crore.

The company has allocated shares worth Rs 1 crore for its eligible employees, who will receive a discount of Rs 19 per share. Half of the issue is reserved for qualified institutional bidders (QIBs), 15% is set aside for non-institutional investors, and the remaining 35% is allocated to retail investors.

SBI Capital Markets and Equirus Capital are the lead managers for the DEE Piping Systems IPO, with Link Intime India acting as the registrar. The shares are scheduled to be listed on both the BSE and NSE, with a tentative listing date of Wednesday, June 26. Several brokerage firms have provided their perspectives on the DEE Development Engineers IPO.

Should You Subscribe to DEE Development Engineers’ Rs 418 Crore IPO?

Choice Broking highlights that DEE Development has shown consistent growth in its order book and maintained stable profitability during the reported period, solidifying its position as the largest process piping solution provider in India. With favorable conditions in key application sectors, the company is well-positioned to benefit from investment growth in these areas over the medium term.

The firm derives nearly half of its business from the oil and gas sector, with the remainder coming from sectors such as power generation and chemicals. However, DEE Development is asking for a P/E multiple of 108.1 times, which is considered high compared to its peers. The firm’s financial performance does not justify this valuation, leading Choice Broking to rate the issue as ‘subscribe with caution’.

Should You Subscribe to DEE Development Engineers’ Rs 418 Crore IPO? Reliance Securities notes that DEE Development is a significant player in the process piping solutions sector, notable for its installed capacity and emphasis on automation and process excellence to enhance operational efficiencies and customer offerings.

The company’s increasing focus on high-margin products, additional contributions from modular skids, and the use of high-grade materials, along with technology partnerships with select global OEMs, are expected to ensure a consistent order flow and establish DEE as a preferred partner for its clients in the coming years. Therefore, Reliance Securities recommends subscribing to the issue.

Should You Subscribe to DEE Development Engineers’ Rs 418 Crore IPO? Canara Bank Securities highlights that DEE Development specializes in process piping solutions, offering engineering and pre-fabrication services. The company operates seven manufacturing facilities across five locations in India and one in Thailand, with a total capacity of 94,500 MTPA. The high entry barriers in this industry make it difficult for new competitors to enter the market, and the company extensively uses automation in its manufacturing processes.

Although 50% of DEE Development’s revenue comes from exports, which impacts margins due to high transportation costs, the industry is projected to grow by 6% from FY23 to FY30. With a robust order book exceeding Rs 828 crore and revenue of Rs 545 crore, the company has strong revenue visibility for the medium to long term. Consequently, Canara Bank Securities gives the IPO a ‘subscribe’ rating with a long-term perspective.

Should You Subscribe to DEE Development Engineers’ Rs 418 Crore IPO? Marwadi Financial Services evaluates DEE Development Engineers based on its FY24 annualized EPS of Rs 2.77 on a post-issue basis. The company is expected to list at a P/E ratio of 73.33 times, resulting in a market capitalization of Rs 1,401.7 crore. In comparison, its peer ISGEC Heavy Engineering trades at a lower P/E ratio of 37.8 times.

DEE Development Engineers is recognized as the largest player in process piping solutions in India by installed capacity, offering specialized solutions through strategically located, advanced manufacturing facilities with significant barriers to entry.

Based on these factors, Marwadi Financial Services assigns a ‘subscribe’ rating to the IPO, indicating their recommendation for investors to consider subscribing to the issue.

Should You Subscribe to DEE Development Engineers’ Rs 418 Crore IPO? Swastika Investmart describes DEE Development Engineers as a prominent player in India’s process piping solutions industry, operating within a niche sector characterized by high barriers to entry. The company holds a strong competitive position supported by longstanding client relationships and a diverse portfolio of specialized offerings.

DEE Development Engineers benefits from a robust order book and has demonstrated consistent financial performance. However, its business is sensitive to economic downturns in key sectors such as oil and gas, power, and chemicals. Competition from both domestic and international players poses additional challenges.

Despite these considerations, DEE’s market leadership, sustained growth trajectory, and strong order visibility make it a compelling choice for long-term investors. Therefore, Swastika Investmart recommends subscribing to the IPO with a long-term investment perspective.

Should You Subscribe to DEE Development Engineers’ Rs 418 Crore IPO? StoxBox emphasizes that DEE Development Engineers’ financial performance is expected to benefit from its strong balance sheet, established customer relationships, ongoing capacity expansion, significant barriers to entry in the market, and a competent management team with impressive backgrounds.

The IPO is valued at a P/E ratio of 56.4 times on the upper price band, based on FY24 earnings. StoxBox considers this valuation fair, considering the company’s strong growth prospects and the loyalty of its customer base.

Therefore, StoxBox recommends a ‘subscribe’ rating for the DEE Development Engineers IPO, indicating their suggestion for investors to consider subscribing to the issue.

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