Dinesh Engineers IPO Review

Dinesh Engineers IPO

Dinesh Engineers IPO issue consists of a fresh issue of  one crore equity shares aggregating up to Rs 185 crore. Dinesh Engineers is a contractor and turnkey player providing passive communication infrastructure mainly to the telecom operators and internet service providers (ISPs).

Dinesh Engineers IPO: Details

Issue Period: Issue Opens: Sept 28, 2018- Oct 03, 2018
Face Value:  INR 10
Public Issue:  1.0 crore shares
Issue Size: ~ INR 185 crore
Price Band: INR 183-185
Bid lot: 80 Equity shares & multiples there of 
BRLMs: Hem Securities
Registrar Link Intime India Pvt. Ltd.

About Dinesh Engineers Ltd.
  • Dinesh Engineers Ltd. 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”). 
  • Company was incorporated in 2006 and through the next several years, it has executed  fiber laying work for many Telecom Operators.
  • Dinesh Engineers Ltd. has been licensed by Department of  Telecommunications (DoT) with the Infrastructure Provider (IP)-I License, under which it can  establish and maintain wired networks,
  • Dinesh Engineers Ltd. business segments include
    • Vendor projects (89.8% of  sales): execution of  projects which involve obtaining Right of Way (ROW) and laying duct and fiber; 
    • As Infrastructure Providers (9.1% of sales), the company leases its own optic fiber network (OFC) of ~7,500 km (under IP-1 license) which runs acrossthe states of Rajasthan, Gujarat, Maharashtra, Goa, Karnataka, Andhra Pradesh and Telengana.
    • Laying gas pipeline for MGL (1.1% of FY18 sales). 
Dinesh Engineers Ltd.: Financials  ( Rs. in Crore)

Particulars 2018 2017 2016 2015
Revenue from Operations 302.17 169.23 122.25 50.88
Revenue Growth (%) 78.56% 38.43% 140.27%
Profit After Tax 61.7 22 12.89 6.95
Net Profit/ Revenue  20.42% 13.00% 10.54% 13.66%
Diluted EPS (Rs.) 20.95 7.45 4.37
Share Capital 29.5 0.25 0.25
Reserves 78.49 45.9 28.73
Net worth 107.99 46.15 28.98
RONW(%) 57.23% 47.63% 44.50%
NAV (Rs.) 36.6 15.64 9.82
Face Value 10
IPO Price 185
Post issue equity  39.5
Post Issue EPS 15.62
PE  11.84
CAGR Sales 3 Yrs 81.09%
CAGR Net Profit 3 Yrs 107.06%
Market Cap 730.75
Market cap / Sales 2.42
Dinesh Engineers  IPO: Pros
  • Dinesh Engineers Ltd. has laid  fibre network of around 9500 Kms for the telecom operators since 2011.
  • The company had an order book of Rs 420 crore to lay fiber network of around 5,600 km in length, which is slated to be executed by the end of the ongoing fiscal.
  • Since the receipt of the IP-I license, Dinesh Engineers Ltd. 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.
  • Demand for its this  leasing business rose, improving the utilisation levels from 20 percent to 32 percent in the three years through March 2018.
  • The company’s major clients are Airtel, BSNL, Reliance Jio, Vodafone, Idea, Tata Communication, etc.
Dinesh Engineers IPO: Risks
  • Dinesh Engineers top 5 customers account for 95% of its revenues
  • Major portion of its revenues are derived from the customers that operate in the telecommunications industry.
  • Dinesh Engineers Ltd. business requires substantial amount of capital expenditure and working capital for carrying our operations. Its total borrowing including both short term and long term finance for the Fiscals 2018 and 2017 was Rs. 282.73 million and Rs. 138.78 million respectively.
Dinesh Engineers  IPO: Assessment
  • Dinesh Engineers Ltd.is expected to benefit from increased data consumption
  • Dinesh Engineers’ earnings per share for the year ended March 2018 is Rs 15.6 and at the upper end of the price band and on fully diluted equity, post the IPO,  price-to-earnings ratio stands at 11.8 times. This seems reasonable.
  • The lead manager Hem Securities has largely been active in SME. Dinesh Engineers IPO is their first main board IPO. 
  • The company will list in T group as IPO size is less than 250 crores.
  • If the company continues to show similar performance and margins, it can prove to be a good investment. However  Management quality cannot be judged for companies with limited track record of operations.
  • Despite a good performance by Dinesh Engineers,  reasonably good prospects , I do not  intend to apply in the Dinesh Engineers IPO as it is relatively difficult to trust a company of this size in such turbulent times when even established companies are under pressure.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk. 

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