Dilip Buildcon IPO opens; 10 things to know before subscribing

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New Delhi | Updated: August 2, 2016 8:37:29 AM

Dilip Buildcon IPO hit capital markets on Monday. The company has fixed the price band of Rs 214-219 per equity share of face value of Rs 10 each.

Dilip Buildcon IPO new ipo bse sensex nse niftyDilip Buildcon IPO hit capital markets on Monday. The company has fixed the price band of Rs 214-219 per equity share of face value of Rs 10 each.

Dilip Buildcon IPO hit capital markets on Monday. The company has fixed the price band of Rs 214-219 per equity share of face value of Rs 10 each. Shares of the company are proposed to list on NSE and BSE. The public offer will close on August 3 (Wednesday). The company on Friday had allocated 89,58,592 equity shares to anchor investors at a price of Rs 219 per equity share.

The IPO of Dilip Buildcon subscribed 0.09 times on the first day of the offer till 5 pm, according to the data available with stock exchanges.

Below are 10 things you should know before investing in Dilip Buildcon IPO:

1) Business and Background: Dilip Buildcon is a Bhopal-based infrastructure player focused on road projects in India. The primary focus of the company is undertaking construction projects across India in the roads and irrigation sectors. Dilip Buildcon business comprises of construction business, under which they build roads, irrigation and urban development projects on an EPC basis. Under infrastructure development business, they undertake building, operation and development of road projects on a BOT basis with a focus on annuity projects.

2) Promoters: Dilip Suryavanshi, Seema Suryavanshi and Devendra Jain and Suryavanshi Family Trust are promoters of Dilip Buildcon. Promoters have a cumulative experience of around 70 years in the business of construction.

3) About the issue: The IPO comprises of fresh issue of equity shares aggregating up to Rs 430 crore and an offer for sale of up to 1,136,364 shares by Dilip Suryavanshi, up to 1,136,364 shares by Devendra Jain and up to 7,954,545 equity shares by the BanyanTree Growth Capital, LLC.

4) Objective of the issue: The amount collected from the fresh issue will be utilised by the company for prepayment or scheduled repayment of a portion of term loans availed by the company and to meet other working capital requirements as well as the net proceeds will also be utilised towards the general corporate purposes. The company will not receive any proceeds from the offer for sale.

5) Lead Managers: IIFL Holdings, Axis Capital, JM Financial Institutional Securities and PNB Investment Services are the book running lead managers to the Issue.

6) Order execution: Dilip Buildcon has been maintaining strong track record on execution front over the years with completion of over 36 EPC and 11 BOT projects in past 5 years. Most of these projects completed either on or ahead of their respective completion schedules for which it has earned early completion bonus to the tune of around Rs 220 crore in last four years.

7) Order Book: In the past five financial years, order book of the company multiplied 4 times on account of strong business development activities. As per CRISIL Research, road investments are likely to be receiving an impetus during FY16-20 period.

8) Financials: Dilip Buildcon has registered a CAGR (compounded annual growth rate) of 36 per cent and 19 per cent in standalone revenue and net profit figures in the past five years.

9) Valuations: According to Reliance Securities, at the price band of Rs 214-219 per share, Dilip Buildcon’s offer comes at a price-to-earnings (P/E) of 11.7-11.4 times trailing (FY16) EPS, which is at 25 per cent discount to its peers like KNR Constructions.

10) Should you invest: According to Reliance Securities, Dilip Buildcon would generate a strong cash flow on the back of healthy margins and improving working capital cycle. The brokerage house believes the promoters have left something on the table for the investors in terms of valuations and expect the issue to generate a better return in the near to medium term for the investors. Reliance Securities has given ‘Subscribe’ rating to the IPO.

According to Angel Broking, Dilip Buildcon is set to give healthy growth on the topline as well as the bottomline front on the back of its strong order book. The EPC player registered return on equity of 22.4 per cent in 2015-16, which is among the best in the industry. Given the growth prospects and the likelihood of strong free cash flow generation, this issue has the potential to deliver good returns for investors in the near-to-medium term. The brokerage house advises investors to ‘Subscribe’ to the issue.

According to Hem Securities, Dilip Buildcon with its attractive operating margins, strong revenue growth and robust order book is well equipped to cater opportunities present in the sector. Hence, the brokerage house are recommending ‘Subscribe’ for medium to long term on issue.


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