IPO Centre     18-Jun-24
New Issue Monitor
Dee Development Engineers
Niche player in specialized piping solutions
To gain from increased investment in oil & gas and power sector globally
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Dee Development Engineers (DDEL), is an engineering company providing specialized process piping solutions for industries such as oil and gas, power (including nuclear), chemicals and other process industries through engineering, procurement and manufacturing. As part of its specialized process piping solutions, it manufactures and supplies 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, de-super heaters and other customized manufactured components.

DDEL provides comprehensive specialized process piping solutions including engineering services such as pre bid engineering, basic engineering, detailed engineering and support engineering, which include engineering of process/ power piping systems for projects, and pre-fabrication services such as cutting and beveling on conventional and CNC machines, welding services on semi-automatic and fully automatic robotic welding machines, conventional and digital radiography, post weld heat treatment using CNG fired fully calibrated furnaces and induction heating process, hydro testing, pickling and passivation, grit blasting (manual and semiautomatic) and painting (manual and semiautomatic).

It also specializes in handling complex metals such as varying grades of carbon steel, stainless steel, super duplex stainless steel, alloy steel and other materials including inconel and hastelloy in manufacturing processes.

Currently DDEL has seven strategically located manufacturing facilities at Palwal in Haryana, Anjar in Gujarat, Barmer in Rajasthan. Numaligarh in Assam and Bangkok in Thailand, with three manufacturing facilities located at Palwal, Haryana. It also operates a temporary manufacturing facility in Barmer, Rajasthan which is a dedicated facility set up to cater to the piping and erection requirements of the HPCL Rajasthan Refinery Limited (the “Barmer Satellite Facility”). Its wholly owned subsidiary, DFIPL, also operates a heavy fabrication facility at Anjar, Gujarat (the “Anjar Heavy Fabrication Facility”). DDEL also have a dedicated engineering facility located at Chennai in Tamil Nadu (the “Chennai Engineering Facility”).

Seven Manufacturing Facilities, the Anjar Heavy Fabrication Facility and Chennai engineering Facility together span an area of approximately 437,453.85 square meters and have a cumulative installed capacity of 94500 MT/annum.

The company operates two biomass power generation plants in the state of Punjab at Abohar and Muktsar (operated by MPPL, a WoS) with a contracted annual capacity of 8 MW and 6 MW, respectively.

Further, DDEL manufactures wind turbine towers through its wholly owned subsidiary, DFIPL, at its Anjar Heavy Fabrication Facility. DFIPL is also involved in the manufacturing of industrial stacks. DDEL intend to develop pilot plants which cater to the research and development needs of companies in the oil and gas, petrochemicals, refineries, specialty chemicals, pharmaceuticals and nuclear sectors, as well towards the research and development needs of educational research institutions. So the new expanded business of design, engineering, fabrication and manufacturing of pilot plants is carried from its Palwal Facility III.

It has commenced operations at the New Anjar Facility I, which has an installed capacity of 3,000 MT per annum, and is in the process of enhancing its manufacturing capabilities by setting up a new manufacturing facility at the New Anjar Facility II with a proposed installed capacity of 9,000 MT per annum, which will increase the total installed production capacity of Anjar facilities (excluding its heavy fabrication capacity) from 3,000 MT per annum to 15,000 MT per annum.

It supplies customers in domestic as well as overseas (in countries including USA, Europe, Japan, Canada, Middle East, Nigeria, Vietnam, Singapore, China and Taiwan). Revenue from operations outside India was 40.53% and 45.10% in 9mFY24 and FY23 respectively. Revenue mix in terms of key end use sector/industry in 9mFY24 was 52.76% from Oil & Gas, 24.65% from power, 11.39% from process industries. Additionally the biomass power generation accounts for 11.20% of 9mFY24 revenue.

Over decades of it operations, the company has developed strong relationships with its customers, including global companies such as JGC Corporation, Nooter Eriksen, MAN Energy Solutions SE, Mitsubishi Heavy Industries, and John Cockerill S.A, and Indian companies such as Reliance Industries Limited, Thermax Babcock & Wilcox Energy Solutions Limited India, HPCL–Mittal Energy Limited, Toshiba JSW Power Systems Private Limited, UOP India Private Limited, Doosan Power Systems India Private Limited and Andritz Technologies Private Limited and has built a loyal base of customers across its markets through relationships with several of these customers for more than a decade.

DDEL as end of Dec 2024 had an order book (OB) worth Rs. 828.704crore, which translate into 139.16% of its FY23 operational revenue. The OB is from diverse sector with 73.8% from O&G, 24.3% from Power and 1.9% from process industries. Of the order book. about 65.9% if overseas orders and balance 34.1% is domestic orders.

The issue

The initial public offer comprises Fresh Issue (equity share aggregating upto Rs 325 crore) and the Offer for Sale of 45,82,000 Equity Shares. The offer for sale is made by Krishan Lalit Bansal, the promoter selling shareholder. Krishan Lalit Bansal will hold 50.77% stake on post issue expanded equity.

Objects of the issue

Of the net proceeds of the offer, about Rs 75 crore will be used for funding working capital requirements of the company; Rs 175 crore for prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company; and balance for general corporate purposes.

Total borrowings as end of Dec 2024 stood at Rs 386.19 crore.

Strength

One of leading process pipe solution providers in the world, in terms of technical capability to address complex process piping requirement arising from multiple industrial segments.

Wide range of specialized product offerings and services making the company as a comprehensive solution provider for its diversified customers spread across geographies and sectors

Over three and a half decades of manufacturing experience and has been able to leverage brand, strategically located manufacturing facilities and engineering capabilities to successfully expand its business.

Long standing customer relationships with a strong order book

Strong focus on automation and process excellence with an experienced engineering team to drive operational efficiencies

Weakness

Top 1/10/20 customers accounted for 12.46%, 66.18% and 86.19% of the revenue in 9mFY24 signaling significant customer concentration.

Any downturn in the oil and gas, power (including nuclear), process industries, chemical sectors would create an adverse impact on revenue from operations, cash flows and financial conditions.

Under utilisation of manufacturing capacities over extended periods, or significant under utilisation in the short-term, could materially and adversely impact the profitability of the company. The Palwal Facility I, that largely caters to power sector is grossly underutilized with capacity utilization about 5-6% in FY23 and 9mFY24.

Subsidiaries have incurred losses in the last three Fiscals and may do so in future also.

Failure to renew PPA with Punjab State Power Corporation for biomass power plant will have adverse impact on the profitability. Lack of availability of feedstock at fair price is also crucial for availability and PLF of the plants.

There have been delays in filing of certain employee provident fund returns of the Company and its Subsidiaries and default/ delay in payment of certain statutory dues.

The Barmer Satellite Facility is a dedicated facility set up to cater to the piping and erection requirements of the HPCL Rajasthan Refinery, which may shut down once the project is completed.

Failure to renew, maintain or obtain the required permits or approvals from customers/regulators in time may result in interruption of operations or loss of business. Change in export-Import policies at key geographies of the company also impact the business of the company.

Valuation

Consolidated (re-stated) sales for FY2023 were up 29% to Rs595.50 crore. With a 240-bp contraction in the OPM, OP was up 7% to Rs 69.18 crore. After accounting for higher other income, higher interest and depreciation, the PBT was up 53% to Rs 20.37 crore. Pat after MI was up 58% to Rs 12.97 crore.

Consolidated sales in the ninemonths ended December 2023 were Rs 545.55 crore. OP was Rs 67.94 crore, with the OPM standing at 12.5%. Pat was Rs 14.34 crore.

On post-issue expanded equity (at the upper price band), the EPS for FY2023 and annualized 9mFY2024 were 1.9 and 2.8, respectively. The asking price, at the upper price band, discounts the annualized 9mFY24 EPS by 72.5 times. The price/BV stood at 1.8 times. There is no properly comparable listed peer.

Dee Development Engineers : Re-stated Consolidated Financials

2103 (12)

2203 (12)

2303 (12)

2312 (9)

Sales

495.22

460.92

595.50

545.55

OPM (%)

10.8

14.0

11.6

12.5

OP

53.68

64.61

69.18

67.94

Other income

17.81

9.92

18.83

12.31

PBIDT

71.49

74.53

88.00

80.25

Interest

27.13

25.34

29.90

27.93

PBDT

44.37

49.19

58.10

52.32

Depreciation

35.54

35.90

37.73

33.29

PBT

8.83

13.29

20.37

19.03

EO Exp

0.00

0.00

0.00

0.00

PBT after EO

8.83

13.29

20.37

19.03

Tax

-5.26

5.10

7.40

4.69

PAT from Continuing Biz

14.08

8.20

12.97

14.34

Share of Profit from Associates

0.12

0.00

0.00

0.00

PAT from Continuing Biz

14.21

8.20

12.97

14.34

Minority Interest

0.00

0.00

0.00

0.00

Net profit

14.21

8.20

12.97

14.34

EPS (Rs)*

2.1

1.2

1.9

2.8

* on post IPO fully dilluted equity (on upper price band) of Rs 69.05 crore. Face Value: Rs 10

EPS is calculated after excluding EO and relevant tax

Figures in Rs crore

Source: Capitaline Corporate database

Dee Development Engineers : Issue Highlights

Fresh Issue (Rs crore)

325

Offer for sale (in equity share nos.)

4582000

Price band (Rs.)

Upper

203

Lower

193

Post-issue equity (Rs crore)

in Upper price band

69.05

in Lower Price Band

69.88

Post-issue promoter (including promoter group) stake (%)

69.34

Minimum Bid (in nos.)

73

Issue Open Date

19-06-2024

Issue Close Date

21-06-2024

Listing

BSE, NSE

Rating

43 /100

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