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Dinesh Engineers IPO Note (Subscribe for Long Term)

Review By Rudra Shares & Stock Brokers Ltd on Sep 27, 2018

THE OFFER

 Issue Open : 28 Sep 2018 to 03 Oct 2018

  »»  Issue Type:  Book Built Issue IPO

   »»  Issue Size: 

         10,000,000 Equity Shares @ 10 aggregating up to Rs 185 cr 

     

  »»  Face ValueRs  10 Per Equity Share 

  »»  Issue PriceRs 183 - Rs 185 Per Equity Share 

  »»  Market Lot80 Shares 

  »»  Minimum Order Quantity80 Shares 

  »»  Listing At:   NSE, BSE

 

CAPITAL STRUCTURE

 

The  share capital of Company, is set forth below:-  (Amount in Rs except share data)

Authorized Share Capital :-

40,000,000 Equity Shares @10 Aggregate value 400,000,000 cr

 Issued, subscribed and paid up capital before the Issue :-

29,500,000 Equity Shares @10 Aggregate value 295,000,000 cr

 Present Issue:-

10,000,000 Equity Shares @ 10 aggregating up to Rs 185 cr

 

OBJECT OF THE OFFER

 

 The objects of the Offer are

 

  • Expansion of business by setting up of further OFC Network under IP-1 License.

 

  • To fund expenditures towards general corporate purposes and

 

  • To meet public issue expenses

 

COMPANY OVERVIEW

 Dinesh Engineers is a passive communication infrastructure provider company It has been licensed by the Department of Telecommunications (DoT) and has an infrastructure provider (IP)-I license.

Its core business of leasing the fibre and duct on IRU basis to telecom operators is a unique business model which forms a major portion of the revenue. The network infrastructure solutions are being used by Airtel, BSNL, Reliance Jio, Vodafone, Idea, Tata Communications, etc.

Since the receipt of the IP-I license, the company has created optic fibre network of around 7,500 kms which runs across the state of Rajasthan, Gujarat, Maharashtra, Goa, Karnataka, Andhra Pradesh and Telangana.

As of April 1, 2018, company’s order book was Rs 420 crore, which is 1.4 times the revenue of FY18.

Recently, the company has also diversified into executing gas pipeline projects. It has undertaken laying gas pipelines in Maharashtra (Mumbai) through sub-contractors assigned by Mahanagar Gas.

BUSINESS OPERATIONS

 DEL’s business operations can be classified under 3 heads:

 

  • Project Execution for Telecom Operators– As per the requirement, telecom companies notify the area where they require the fibre network. Once the project is notified, it is assigned to the company, and with ROW permissions, the company initiates the project.

 

  • Laying fibre under IP-I License (IP-I)– Under this segment, the company maintains the assets such as dark fibres, right of way and duct space to grant on lease/rent/sale on IRU basis to the licencees of telecom services providers and other vendors.

 

  • Operations & Maintenance - It undertakes the operations & maintenance activity for the telecom operators and of the leased fibre maintained under IP-1 License. The operation and maintenance activities involves deploying manpower and tools required for maintenance such as splicing machine, rodometre, OTDR machine, etc.  

ROAD MAP AHEAD

 

    Company objectives are to expand their market share and aim to accomplish this through the following strategies:

 

  • To enhance the coverage of the Optic fiber network.
  • Expand into business areas that create synergies with current business
  • Augment customer relationships.
  • Enhance project execution capabilities.
  • Continue to focus on strengthening the goodwill of company name.

 

STRENGTHS

  • Established Optic fiber network in India.

 

  • Strong project management and execution capabilities.

 

  • Efficient Business Model.

 

  • Long standing customer relationships with strong repeat business.

 

  • Experienced Promoter, Management Team and Skilled Workforce.

 

  • Quality Certification

 

  • Co-ordial relationship with suppliers and contractors.

 

FINANCIAL HIGHLIGHTS

 

       Total Revenues stood Rs 302.77cr, Rs 169.91cr and Rs 122.5cr, in Fiscal 2018, Fiscal 2017 and Fiscal 2016 respectively.

      

       PBT  was Rs 95.11cr, Rs 33.79cr and Rs 19.71cr, in Fiscal 2018, Fiscal 2017 and Fiscal 2016 respectively.

      

       PAT was Rs 21.27cr, Rs 7.58cr and Rs 4.44cr, in Fiscal 2018, Fiscal 2017 and Fiscal 2016 respectively.

      

        As of April 1, 2018, company’s order book was Rs 420 crore, which is 1.4 times the revenue of FY18.

 

RISK FOR THE BUSINESS

  • Company is party to certain legal proceedings. Any adverse decision in such proceedings may have a material adverse effect on business.

 

  • A significant portion of revenue is generated from limited number of large customers and if company is unable to maintain relationship with such customers, it may adversely affect business.

 

  • The market in which company operate is highly competitive.

 

  • The loss of key suppliers or their failure to deliver equipment and material on a timely basis could negatively impact business.

 

  • Changing laws, rules and regulations and legal uncertainties, including adverse application of tax laws and regulations, may adversely affect business.

Conclusion / Investment Strategy

DEL is primarily engaged in executing optical fiber laying work for telecom operators and internet service providers in India and has created optic fibre network of around 7,500 kms which runs across the state of Rajasthan, Gujarat, Maharashtra, Goa, Karnataka, Andhra Pradesh and Telangana.

On the upper price band of Rs 185  with EPS of Rs 21.27 for FY18, P/E works out at 8.69x.

Taking into consideration, strong financial performance of the company, the positive future outlook, Established Optic fiber network in India and Expansion into other business areas (Gas Pipeline Laying) will generate additional revenue in the upcoming years.

Moreover, Government Initiative & Budget Support for Optical Fiber Industry and  the rollout of 4G/5G in the country would also propel the demand of optic fibers. Based on the above aspects, we recommend to "SUBSCRIBE" the IPO for long term benefits.

Review By Rudra Shares & Stock Brokers Ltd on Sep 27, 2018

Review Author

Rudra Shares & Stock Brokers Ltd.

Rudra Shares & Stock Brokers Ltd. is Kanpur based brokerage houses offering services to Retail and HNI customers. Rudra Shares offer a range of financial services which includes institutional and retail brokerage of Equity, Currency, Commodities, Derivatives, Online Trading, Depository Services, Fixed Deposits, IPOs and Mutual Funds Distribution, Wealth Advisory and Research.

More Dinesh Engineers Limited IPO Views / Analysis / Recommendations ...

The Dinesh Engineers IPO Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered IPO Analysts tells you if Dinesh Engineers IPO worth investing. The Dinesh Engineers IPO Note sets the IPO expectations in systematic way which tells you if Dinesh Engineers IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Dinesh Engineers IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.


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