DEE Development Engineers listing tomorrow: Stock likely to debut at over 40% premium

DEE Development Engineers IPO listing

Shares of DEE Development Engineers, a piping solutions provider, is likely to make its stock market debut at over 40 percent premium on June 26, experts said. The robust response to the IPO by investors through subscription numbers, strong order book, healthy financial performance, and long-standing customer relationships, along with positive market conditions are some of the key reasons for the expected stellar debut.

The Rs 418-crore public issue received 99.56 times subscription during June 19-21, with qualified institutional buyers subscribing 201.91 times the allotted quota. Non-institutional investors (high networth individuals), and retail investors bought 144 times and 23.42 times the portions set aside for them, respectively, while employees bid 44.73 times the reserved portion.

The public issue comprised of fresh issue of Rs 325 crore and an offer-for-sale of 45.82 lakh equity shares worth Rs 93.01 crore at the upper end of price band of Rs 193-203 per share.

Furthermore, the equity market conditions were also strong as the Nifty 50, and BSE Sensex recorded new high on June 25, rising more than 5 percent for the current month, after the Lok Sabha election results and ahead of Union Budget scheduled in second half of July.

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DEE Development Engineers provides specialised process piping solutions for oil and gas, power (including nuclear), chemicals, and other process industries through engineering, procurement, and manufacturing.

"We expect a listing at around Rs 300-320 per share, resulting in a listing gain of around 50 percent over the final issue price of Rs 203 per share," Amit Goel, Co-Founder & Chief Global Strategist of Pace 360 said.

Prathamesh Masdekar, Research Analyst at Stoxbox, expects the stock to list at a premium of around 47 percent.

The Indian pipe process industry has a decent growth outlook as it is expected to grow at a CAGR of 6.1 percent between FY23 and FY30, supported by oil and gas, chemicals/petrochemicals, ethanol, biomass, and power sectors.

On the financial front, DEE Piping Systems recorded 58.3 percent on-year growth in net profit at Rs 13 crore for the year ended March FY23, with revenue rising 29.2 percent to Rs 595.5 crore compared to previous year. For the nine months period ended December 2023, profit stood at Rs 14.34 crore on revenue of Rs 545.6 crore.

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"The company is deleveraging its balance sheet by reducing debt. As we advance, the company's financial performance is likely to be driven by its robust balance sheet, long-standing customer relationships, capacity expansion, higher entry barriers, and strong management team with impressive backgrounds," said Masdekar.

DEE will utilise net fresh issue proceeds for its working capital requirements amounting to Rs 75 crore, and repaying debts worth Rs 175 crore, besides general corporate purposes. The debt on its books as of December 2023 was Rs 407.1 crore.

Its IPO shares were available at more than 40 percent premium in the grey market, an unofficial platform for trading in IPO shares till the listing, the market observers said.

"The overwhelming demand (in terms of grey market premium and subscription numbers) paints a very positive picture for the listing of DEE, a leading player in the niche and high-barrier Indian process piping solutions industry," said Shivani Nyati, Head of Wealth at Swastika Investmart.

The company had an order book of Rs 828.7 crore as of December 2023, which was 1.5 times its revenue for 9MFY24.

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