Despite Strong Subscription and GMP, Deepak Builders & Engineers IPO Makes a Weak Debut

Weak Start for Deepak Builders & Engineers IPO on Listing Day

The highly anticipated IPO of Deepak Builders & Engineers India Limited made its market debut on October 28, listing at Rs 200 on the NSE and Rs 198.5 on the BSE. This represents a 1.5% discount from its issue price of Rs 203 per share. The initial listing fell short of grey market expectations, where shares were trading at a premium of 16% before the debut.

The grey market is an unofficial trading ecosystem where shares begin trading before the official public offer, often providing a pre-listing sentiment gauge. The miss on grey market projections and the weak start in formal trading reflect the currently cautious mood in broader equity markets.

Strong IPO Subscription Reflects Investor Confidence

Despite a lackluster listing, Deepak Builders & Engineers’ IPO saw a tremendous response from investors during its subscription phase. The IPO received bids for 37.24 crore shares, amounting to a subscription of 41.54 times the offer size of 89.67 lakh shares.

Among the investors:

• Non-institutional Investors (HNIs): Leading the demand with an impressive 82.47 times subscription.
• Retail Investors: Displayed strong interest, subscribing 39.79 times their allocated portion.
• Qualified Institutional Buyers (QIBs): Contributed with a 13.91 times subscription, underscoring the stock’s perceived potential.

This overwhelming response highlights investor optimism towards the company, which was further bolstered by anchor investments totaling Rs 78 crore raised on October 18.

Strategic Plans for IPO Proceeds

The Rs 142 crore raised through the IPO will primarily be used to strengthen the company’s balance sheet:

• Debt Repayment: A portion will address debt obligations, enhancing financial stability.
• Working Capital Requirements: Funds will support ongoing and upcoming projects.
• General Corporate Purposes: Ensuring flexibility for growth and operational needs.

These allocations reflect Deepak Builders & Engineers’ commitment to optimizing capital use and positioning for sustainable growth.

Deepak Builders & Engineers: A Strong Market Player with a Diverse Portfolio

Founded in 2017 and headquartered in Ludhiana, Deepak Builders & Engineers specializes in the construction of administrative, institutional, and industrial buildings. The company has executed complex turnkey projects that include architecture, civil work, MEP (Mechanical, Electrical, Plumbing), firefighting, IT infrastructure, medical gas pipelines, and landscaping services.

The company’s diverse project portfolio includes hospitals, stadiums, and residential complexes. As of June 2024, Deepak Builders held an order book of ₹1,380 crore, with 66% of projects from the railway sector. This robust order book demonstrates the company’s strong industry position and ability to secure significant government contracts.

Financial Performance: Steady Growth Amid Expanding Order Book

Deepak Builders & Engineers has shown consistent growth in recent years:

• Revenue Growth: The company’s revenue from operations reached Rs 511 crore in FY24, marking an increase from Rs 433 crore the previous year.
• Profit Surge: Net profit doubled to Rs 60.4 crore, showcasing the company’s ability to capitalize on revenue expansion and maintain profitability.

These financials affirm the company’s ability to generate stable revenue streams, supporting investor confidence in its long-term potential.

Post-Listing Performance and Market Sentiment

Following the IPO listing, shares of Deepak Builders & Engineers dropped further, trading at Rs 173.82 on the NSE, a 13.09% decline from the issue price. The drop underscores a cautious sentiment among investors amid broader market volatility. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.