Deepak Builders Engineers IPO Opens at ₹200 on NSE, Weak Start Noted

Deepak Builders Engineers India Limited, a company specializing in construction of administrative, institutional, and industrial buildings, had a disappointing debut on the Indian stock market on Monday, 28th October 2024, with its shares listing at a discount and falling further on the National Stock Exchange (NSE).

Listing Details

• Listing Price: Deepak Builders Engineers India shares were listed at ₹200 per share on NSE, marking a weak start to its journey as a publicly traded company.
• Comparison to Issue Price: The listing price represents a discount to the IPO issue price. Deepak Builders had set its IPO price band from ₹192 to ₹203 per share, with the final issue price being fixed at the upper end of ₹203.
• Percentage Change: The listing price of ₹200 on NSE translates to a discount of 1.5% over the issue price of ₹203.

First-Day Trading Performance

• Opening vs. Latest Price: Following its negative opening, Deepak Builders' share price experienced a significant decline. By 11:02 AM, the stock was trading at ₹170.65, down 15.94% from its previous closing price.
• Market Capitalisation: As of 11:02 AM IST, the company's market capitalisation stood at ₹784.38 crore.
• Trading Volume: The traded volume was 50.99 lakh shares with a traded value of ₹90.69 crore, with 49.73% deliverable quantity, indicating strong selling pressure on the first day of listing.

Market Sentiment and Analysis

• Market Reaction: The market reacted negatively to Deepak Builders' listing, with the stock experiencing continuous selling pressure during early trading.
• Subscription Rate: The IPO was well subscribed by 41.54 times, with NIIs leading at 82.47 times subscription, followed by retail investors at 39.79 times, and QIBs at 13.91 times.
• Trading Range: As of 11:02 AM IST, the stock hit a high of ₹198.85 and a low of ₹168.95 during early trading.

Growth Drivers and Challenges

Expected drivers of future performance:

• Strong order book worth ₹1,380+ crore as of June 2024
• Diversified project portfolio across multiple states
• Modern construction equipment fleet
• Experience in executing complex infrastructure projects

Potential challenges:

• Litigation matters amounting to over ₹87 crore
• High competition in construction sector
• Dependency on government contracts
• Working capital intensive business

Utilisation of IPO Proceeds 

• Deepak Builders plans to use the funds for:
• Repayment/prepayment of certain borrowings
• Funding working capital requirements
• General corporate purposes

Financial Performance 

The company has demonstrated strong growth:

• Revenue increased by 19% to ₹516.74 crore in FY2024 from ₹435.46 crore in FY2023
• Profit After Tax (PAT) rose by 182% to ₹60.41 crore in FY2024 from ₹21.40 crore in FY2023

As Deepak Builders begins its journey as a listed entity, market participants will closely monitor its ability to execute its order book and maintain growth momentum. The weak listing and subsequent decline suggest cautious market sentiment despite the company's strong financial performance. Investors will be watching for sustained execution capabilities and effective management of working capital requirements.