Ducon Infra RI review (May apply)

• The company is in the business of providing FGD systems and related services.
• The company marked growth in its top and bottom lines for the reported periods.
• Based on its financial data, the RI relatively appears fully priced.
• Well-informed investors may park funds for long term.

ABOUT COMPANY:
Ducon Infratechnologies Ltd. (DIL) is operating in five business segments - 1. Clean Energy - Flue Gas Desulfurization, 2. Engineering Procurement and Construction - Dry Bulk Handling Equipment, 3. Rural and Urban Electrification, 4. Video Security Surveillance solutions through Artificial Intelligence and
5. Aerospace Engineering.

On 7 December 2015, the Government published new environmental norms for coal-based power plants. The regulations aimed to drastically cut down emissions of particulate matter (PM), sulphur dioxide (SO2) and oxides of nitrogen (NOx) and bring them closer to international standards. With the new tighter air emissions regulations, the current installed capacity of 230 GW of coal thermal power plants in India have started to install the required Flue Gas Desulphurization (FGD) systems to meet the new clean air standards requiring an investment of thousands of crores in FGD plant installations.

As of date, the FGD orders for only 50 GW have been placed and the remaining 180 GW power plants intend to place their orders in the coming years. It is a FGD supplier in the Indian market and have a successfully operating limestone FGD system for more than 5 years in India. Among the Company's many successfully operating FGD installations in India, the notable ones include: (i) 500 MW seawater FGD systems at Dahanu power plant and (ii) 2x550 MW Limestone FGD system at Udupi Power Plant. DIL is a rapidly growing Fossil Fuel/Coal Clean Technology Company at the forefront of brining Fossil Fuel Clean Technology/Green Fossil Fuel Technology to India's transformation to Green Energy.

DIL has diversified technologies and operates in a variety of business segments, to provide solutions and meet challenges in the infrastructure, FGD systems and material handling sectors. In the infrastructure sector, the company provides complete FGD systems in thermal power plants, and provides bulk material handling systems for Alumina, fly ash handling systems and electrification projects. It is a medium size EPC company in the field of Air Pollution Control, Flue Gas Desulphurization (FGD) Systems in India, Wet Scrubbers, Bag Filters, Cyclones. Material Handling Systems (Belt Conveyor Systems, Pipe Conveyor System, Pneumatic Conveying System, Air Slides, Silo Systems), and Rural Electrification. As of March 31, 2024, it had 60 employees on its payroll.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 64985118 equity shares of Re. 1 each at a fixed price of Rs. 7 per share to mobilize Rs. 45.49 cr. The RI has already opened for subscription on September 12, 2024, and will close on September 19, 2024. The company is offering RI in the ratio of 1 for 4 to its eligible stakeholders as of the record date of August 30, 2024. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 4.05 cr. for this RI process and from the net proceeds, it will utilize Rs. 37.00 cr. for working capital, and Rs. 4.44 cr. for general corporate purposes.

The issue is solely lead managed by Mark Corporate Advisors Pvt. Ltd., and Bigshare Services Pvt. Ltd. is the registrar to the issue.

Post-RI, company's current paid-up equity capital of Rs. 25.99 cr. will stand enhanced to Rs. 32.49 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 227.45 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has (on a consolidated basis) posted a total revenue/net profit/ - (loss) of Rs. 396.14 cr. / Rs. 4.10 cr. (FY23), Rs. 419.51 cr. / Rs. 7.63 cr. (FY24).

As per BSE filing, the company has earned a net profit of Rs. 3.07 cr. on a total income of Rs. 109.56 cr. for Q1 of FY25 ended on June 30, 2024.

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects.

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 534674 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 11.28 on August 29, 2024, and opened on an ex-right basis at Rs. 10.45 on August 30, 2024. Since then, it has marked a high/low of Rs. 10.94 / Rs. 9.03. The scrip last closed at Rs. 10.06 as of September 11, 2024. For the last 52 weeks' it has posted a high/low of Rs. 11.94 / Rs. 5.85.

The promoters' holding declined to 51.97% for the last two quarters ended on June 30, 2024 against 59.66% for previous quarter ended with December 31, 2023. The counter is well managed above the RI price to lure investors.

Conclusion / Investment Strategy

The company is engaged in the business of providing FGD solutions with related services. It is poised for bright prospects as has been shown in its financial performance. However, the RI is relatively appearing fully priced, hence well-informed investors may park funds for long term.

Review By Dilip Davda on September 12, 2024

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: dilip_davda@rediffmail.com ).

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Ducon Infratechnologies Ltd Review by Dilip Davda

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