Dinesh Enginers IPO review (Apply)

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Review By Dilip Davda on September 21, 2018

• The company is a niche player in telecom/gas infra segment.
• It has shown excellent financial performance with good margins.
• Orders on hands worth Rs. 420 cr.
• No listed peers to compare with.
 
ABOUT COMPANY:
Dinesh Engineers Ltd. (DEL) is a passive communication infrastructure provider Company in India, focused on providing passive communication infrastructure services mainly to the Telecom operators and internet service providers ('ISPs'). The company has been licensed by Department of Telecommunications (DoT) with the Infrastructure Provider (IP)-I License, under which it can establish and maintain wired networks, Duct space for the purpose to grant on lease or sale on IRU basis to the licensees of Telecom operators, ISPs etc. DEL's key expertise lies in the field of providing support services to telecom vendors which inter alia includes project management for laying of the duct and optic fibre cables, construction of basic transmission and telecom utilities, dark fiber leasing, optical fiber network construction, maintenance of duct and optic fibre and optical fibre project turnkey services to various Telecom network operators & broad band Service operators across the states of India.

Since the receipt of the IP-I license, DEL has created own optic fibre network of around 7500 kms which runs across the state of Rajasthan, Gujarat, Maharashtra, Goa, Karnataka, Andhra Pradesh and Telengana. Its wired network infrastructure solutions are used by many Telecom Companies such as Airtel, BSNL, Reliance Jio, Vodafone, Idea, Tata Communication etc. which helps them inter-alia in increasing network's bandwidth, maximize existing network capacity, improve network performance and availability.

Since the year 2011, it has laid fibre network of around 9500 Kms for the telecom operators under the Vendor projects which run across the states of Maharashtra, Gujarat, Uttar Pradesh, Bihar, Karnataka, Andhra Pradesh, Chhattisgarh, Goa and Rajasthan and are currently being used by companies like BSNL, Airtel, Vodafone, Idea Cellular, Reliance Jio, TTML, BSNL, Reliance Corporate IT Park and TCIL. Apart from laying the network under the Vendor project or own network, company is also engaged in the operations & maintenance activity of the fibre network and preventing the underground optic fiber therein from getting cut due to activities like road repairs, digging and expansion works by various authorities.

Based on the past records and experience in the field of lying the fibre for the Telecom operators, Mahanagar Gas Limited has entrusted the company with the laying of its gas pipelines under the city of Mumbai. The gas pipeline laying work will help it to diversify in the field of gas sector and will also open new business avenues for the company. The work of laying the gas pipeline has been undertaken through outsourcing the same to the sub-contractors.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans of expansion of business by setting up of further OFC Network under IP-1 Licenses, working capital and general corpus fund needs, DEL is coming out with a maiden IPO of 10000000 equity shares of Rs. 10 each via book building issue. It has fixed the price band at Rs. 183-Rs. 185 and mulls mobilization of Rs. 183 cr. to Rs. 185 cr. based on lower and upper price bands. Minimum application is to be made for 80 shares and in multiples thereon, thereafter. Issue opens for subscription on 28.09.18 and will close on 03.10.18. Post allotment, shares will be listed on BSE and NSE. Issue constitutes xx@ of the post issue paid up capital of the company. Issue is solely lead managed by Hem Securities Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. All its equity is issued at par and the company has also given bonus in the ratio of 117 for every 1 share held in November 2017. Average cost of acquisition of shares by the promoters is Rs. 0.08 per share. Post issue DEL's current paid up equity capital of Rs. 29.50 cr. will stand enhanced to Rs. 39.50 cr.

FINANCIAL PERFORMANCE:
On financial performance front, for last three fiscals, DEL has (on a consolidated basis) posted turnover/net profits of Rs. 122.50 cr. / Rs. Rs. 12.89 cr. (FY16 – Proforma), Rs. 169.91 cr. / Rs. 22.00 cr. (FY17) and Rs. 302.78 cr. / Rs. 61.70 cr. (FY18). For last three fiscals, it has (on a consolidated basis) posted an average EPS of Rs. 13.69 and an average RoNW of 51.91%. Issue is priced at a P/BV of 5.05 on the basis of its NAV of Rs. 36.60 as on 31.03.18. If we consider FY18 earnings and attribute it to fully diluted post issue equity, then asking price is at a P/E of around 12 that makes this issue reasonably priced. Currently company has orders on hand worth Rs. 420 cr.

COMPARE WITH LISTED PEERS:
As per offer document, it has no listed peers to compare with.

MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's front, this is the 50th mandate from its stable in last six fiscals. Out of last 10 listings, 2 opened at discount and the rest with a premium ranging from 2.78% to 20% on the day of listing.

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