DEE Development Engineers Limited IPO: Get Date, Price, Review and Details

Introduction:

Dee Development Engineers Limited was incorporated on 21^st March 1988. Currently, the company offers specialized process piping solutions for industries such as oil and gas, power, chemical and other process industries. The company has manufacturing experience of over three and a half decades and has been able to leverage the brand, strategically located manufacturing facilities and engineering capabilities successfully.

The company has a customer base in India and beyond, where the company’s exports account for more than 40% of its turnover. The company has 7 manufacturing facilities as on 31.12.2023, one of which is located outside India.

IPO Details:

Objectives of Issue:

• The company will utilize the net proceeds to fund its Net working capital requirements to the extent of 75 crore.
• The prepayment or repayment of all or portion of outstanding borrowing to the tune of 175 crores.
• The balance will be utilized for general corporate purpose.

Key Strengths:

• High Barriers to Entry- The Industry has high entry barrier in the form of technology complexity, high capital investment, requirement for skilled labour and presence of robust design and execution capability.
• Excellent Execution Capability – The industry requires perfect execution as operations are complex and non-adherence to which attracts costs in terms of warranty claims, liability claims and invocation of bank guarantee due to non-satisfying performance. The company had not been exposed to any such cost in the last 3 fiscal year and in 9 month ended 31/12/23. The average cost for rectifying products was around 0.15% of the revenue from operation.
• Largest player in process piping solution in India in terms of installed capacity- The Company currently is ranked as one of the leading process pipe solution providers in the world, in terms of technical capability to address complex process piping requirement arising from multiple industrial segments. At present, the company is the largest player in process piping solutions in India, in terms of installed capacity.

Risks:

• Non-existence of long-term contracts with customers – The company’s top 10 customers contribute more than 65% of the revenue. However the company does not have long term contract with major of the customers. Hence if company fails to retain the customers, it will significantly affect its operations.

• Exposure to foreign currency exchange risks- The company revenue from operations outside India amounts to more than 40% and raw material cost sourced from outside India amounts to more than 20% of the revenue. Company uses derivative financial instruments to hedge foreign currency risk, however volatility in exchange rates could increase the cost of operation.

• Recurring losses by subsidiaries in last 3 fiscal years-The company subsidiaries have repeatedly reported losses in the last 3 years. Company has provided corporate guarantee to the subsidiaries to provide financial support to the companies. Subsidiaries inability to satisfy the obligation may result to enforcement of guarantee against the company.

• Major of projects are awarded through competitive bidding process – The company obtain a large portion of our business through a competitive bidding process in which it compete for projects based on, among other factors, pricing, technical capabilities and performance, as well as reputation for quality, experience, past track record, and financing capabilities. The company inability to effectively bid for such projects in the future could impact our operations and financial condition.

Financial Snapshot:

Interest Coverage Ratio – Interest Coverage Ratio determines the ability of a company to fulfill its interest obligations. It is a ratio that compares company earnings (before interest and taxes) to interest expenses. Essentially, it shows how many times a company can pay its interest charges using its operating profit. A higher ICR suggests a company is in a good financial position to handle its debt, while a lower ICR could signal potential financial difficulties.

Debt to Equity Ratio - The debt-to-equity (D/E) ratio is used to evaluate a company’s financial leverage and is calculated by dividing a company’s total liabilities by its shareholder equity. It is a measure of the degree to which a company is financing its operations with debt rather than its own resources.

KPI comparison with Industry Peers