DEE Piping Systems IPO Review

Dee Developments is an engineering company providing specialised process piping solutions for industries such as oil and gas, power (including nuclear), chemicals and other process industries through engineering, procurement, and manufacturing. DEE Piping Systems IPO is planning to raise Rs 418.01 crores. The issue is a combination of fresh issue of 1.6 crore shares aggregating to Rs 325.00 crores and offer for sale of 0.46 crore shares aggregating to Rs 93.01 crores by the Promoter.

IPO opensJune 19, 2024
IPO ClosesJune 21, 2024
IPO Size (Rs.)₹418.01 Cr(20,591,852 shares)
BreakupFresh ₹325.00 Cr + OFS  ₹93.01 Cr
Face Value:₹ 10 per share
IPO Price in Rs :₹193 to ₹203 per share
Minimum Lot73 Shares
Listing AtNSE, BSE
NII Quota~15%
Retail Quota~35%
 Lead ManagerSBI Capital Markets, Equirus Capital
Registrar Link Intime India

About DEE Piping Systems:

  • The company was incorporated as DE Development Engineers Pvt. Ltd. In 1988.
  • DEE Development Engineers is an engineering company providing specialized process piping solutions for industries such as oil and gas, power, chemicals and other process industries through engineering, procurement and manufacturing.
  • The company had an installed capacity of 94,500 MTPA in FY2023 and it has set up the Numaligarh Facility with a capacity of 6,000 MTPA, which began operating on February 25, 2024.
  • The company manufactures and supply piping products such as high-pressure piping systems, piping spools, high frequency induction pipe bends, Longitudinally Submerged Arc Welding pipes, industrial pipe fittings, pressure vessels, industrial stacks, modular skids and accessories including, boiler superheater coils, de-super heaters and other customized manufactured components.
  • The company’ has  7 manufacturing facilities which arelocated at Palwal in Haryana, Anjar in Gujarat, Barmer in Rajasthan. Numaligarh in Assam and Bangkok in Thailand.
  • It has with 3 Manufacturing Facilities located at Palwal, Haryana mainly for power sector.
  • The company also operates a temporary manufacturing facility in Barmer, Rajasthan to cater to the piping and erection requirements of the HPCL Rajasthan Refinery.
  • The Promoters of the company are Krishan Lalit Bansal, Ashima Bansal and DDE Piping Components Private Limited.

Financials: DEE Piping Systems IPO

Particulars  (₹ In Cr)2023(09)2023(12)2022(12)2021(12)
Revenue from operations545.55595.5460.92495.22
EBITDA Margin (%)12.45%11.62%14.02%10.84%
PAT Margin (%)2.63%2.18%1.78%2.87%
Share Capital53.0410.6110.6115.69
Net Worth428.19413.7401.37448.5
Net Debt371.06319.83260.09224.68
Post issue Share Capital69.05   
IPO price203.0   
EPS Fy231.2   
PE Fy23170.9   
EPS Fy24 (annualized)2.8   
PE Fy24  (annualized)73.3   
Market cap in Lacs1,402   
Market cap / Sales2.35   

DEE Piping Systems IPO: Anchors

DEE Piping Systems IPO: Salient Points

  • DEE Development Engineers is ranked as one of the leading process pipe solution providers globally, in terms of technical capability to address complex process piping requirements arising from multiple industrial segments.
  • At present , the company is the largest player in process piping solutions in India, in terms of installed capacity.
  • The offer for sale is made by Krishan Lalit Bansal, the promoter of the company.
  • From Net Proceeds from the Fresh Issue:
    • Working capital requirements of the company – Rs. 75 crore
    • Prepayment or repayment of all or a portion of certain outstanding borrowings Rs. 175 crore
    • General corporate purposes
  • The company has recently expanded into a new business vertical of design, engineering, fabrication and manufacturing of pilot plants. The company plans to provide a one-stop solution for the pilot plant requirements of its customers in the oil and gas, petrochemicals, refineries, specialty chemicals, pharmaceuticals and nuclear sectors.
  • Company also fabricates wind turbine towers, but that is a small portion less than 5% of revenue.
  • They were earlier heavy on Power sector but lower capacity addition in Power sector few years back made them to switch to oil and gas sector as well. Now oil and gas, currently accounts for over 50% of revenue.
  • For 9mFY24 the revenue break up was 52.76% from Oil & Gas, 24.65% from power, 11.39% from process industries.
  • Additionally biomass power generation accounted for 11.20% of 9mFY24 revenue. They operate two biomass power generation plants in the state of Punjab at Abohar and Muktsar of 8 MW and 6 MW.
  • Leading player in an industry with significant barriers to entry;
  • Largest player in process piping solutions in India, providing specialized process piping solutions with strategically located state-of-the-art Manufacturing Facilities;
  • Long standing customer relationships with a strong order book; The company’s order book has increased to ₹ 828.70 Cr as on December 31st, 2023 as against ₹ 335.68 Cr in FY21.
  • Their clients include JGC Corporation, Nooter/Eriksen, MAN Energy Solutions SE, Mitsubishi Heavy Industries, John Cockerill S A, Reliance Industries, HPCLMittal Energy Ltd,Toshiba JSW Power Systems, Thermax Babcock & Wilcox Energy Solutions Limited India, UOP India Private Limited, Doosan Power Systems India Private Limited and Andritz Technologies Private Limited etc.
  • It supplies overseas in countries including USA, Europe, Japan, Canada, Middle East, Nigeria, Vietnam, Singapore, China and Taiwan. Revenue from operations outside India was 45.10% FY23.
  • On the flip side:
    • EBITA margin have ranged around 10%. Thus it is low margin business.
    • Both RoCE and RoE are poor.
    • In 2021, company bought-back PE investor Carlyle’s 32% stake for Rs. 51 cr, This was however COVID time.
  • The company’s Revenues from Operations have grown to ₹ 595.50 Cr in FY23 from ₹ 495.22 Cr in FY21
  • EBITDA margins have improved to 11.62% against 10.84% in the above period.
  • They reported a PAT of ₹ 12.97 Cr in FY23 which was Rs 14.21 CR in FY21.
  • They commenced operations at the New Anjar Facility I, which has an installed capacity of 3,000 MT per annum, and is in the process of enhancing its manufacturing capabilities by setting up a new manufacturing facility at the New Anjar Facility II with a proposed installed capacity of 9,000 MT per annum, This will lead to lower costs of import of raw material as well as exports. Further Numaligarh Facility with a capacity of 6,000 MTPA, has started operating from February 25, 2024.
  • Lower interest due to repayment of debt will also add to bottom line.
  •  DEE Piping Systems IPO is coming at a PE of 154x ( (FY23) and 41x (FY24 annualized).
  • GMP as reported on social media has been Rs. 95 (47%)
  • Peers: None
  • I am likely to apply in DEE Piping Systems IPO despite some concerns. The valuations look to be on higher side and capture most of the positives and seem to be taking advantage of current market conditions. New plant at Anjar , near to the ports will help it to save cost both on import of raw material and its export orders.
  • Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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