Dinesh Engineers IPO – Attractively Priced – Should you invest?
Dinesh Engineers IPO would open for subscription on 28th September, 2018. Dinesh Engineers Limited is passive communication infrastructure provider company in India. This company is coming up with an IPO to issue 1 Crore shares to the general public. Company revenues grew at 88% CAGR in the last 5 years. Its profits are on increasing mode. This IPO is attractively priced compared to recent IPOs that came up subscription. What are the hidden factors in Dinesh Engineers IPO? Should you invest in an Dinesh Engineers IPO or Avoid?
About Dinesh Engineers Limited
They are a passive communication infrastructure provider company in India, focused on providing passive communication infrastructure services mainly to the Telecom operators and internet service providers.
The company was incorporated in 2006, and through the next several years, they are working towards executing the fiber laying work for many Telecom Operators. Company has been licensed by Department of Telecommunications (DoT) with the Infrastructure Provider (IP)-I License, under which they can establish and maintain wired networks, Duct space for the purpose to grant on lease or sale on IRU basis to the licensees of Telecom operators, ISPs etc. Company key expertise lies in the field of providing support services to telecom vendors which inter alia includes project management for laying of the duct and optic fibre cables, construction of basic transmission and telecom utilities, dark fiber leasing, optical fiber network construction, maintenance of duct and optic fibre and optical fibre project turnkey services to various Telecom network operators & broad band Service operators across the states of India.
Dinesh Engineers IPO Issue details
IPO opening date: 28-Sep-2018
IPO closure date: 3-Oct-2018
Face Value: Rs 10 per share
Issue price band: Rs 183 to Rs 185 per share
Issue size: 185 Crores on upper price band.
IPO Lot size: 80 shares and 80 shares, there-off
Minimum investment: Rs 14,800 on higher price band
Leading Managers: HEM Securities
Listing: BSE / NSE
Objects of the Dinesh Engineers IPO issue
Here are Objects of the IPO issue:
1) Expansion of business by setting up of further OFC Network under the IP-1 License;
2) To fund expenditures towards general corporate purposes; and
3) To meet public issue expenses.
Who are the Company Promoters?
Company promoters are (i) Mr. Dinesh Kollaiah Kargal and (ii) Mrs. Shashikala Dinesh Kargal.
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How does Company Financials (Standalone Reinstated) look?
1) The company generated revenue of Rs 23.9 Crores for the year ended Mar-14 and Rs 302.7 Crores for the year ended Mar-18.
2) The company posted a profit of Rs 5.8 Crores for the year ended Mar-14 and profit of Rs 61.8 Crores for the year ended Mar-18.
3) Its EPS for FY18 was Rs 20.99 and 3 years average EPS is Rs 13.7.
Which are the key strengths of Dinesh Engineers Limited?
Here are the key strengths of the company.
1) Established Optic fiber network in India.
2) Strong project management and execution capabilities.
3) Efficient Business Model.
4) Long standing customer relationships with strong repeat business.
5) Experienced Promoter, Management Team and Skilled Workforce.
6) Quality Certification.
7) Co-ordial relationship with company suppliers and contractors.
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What Strategies of Dinesh Engineers Ltd want to adopt in future?
Here are the company strategies.
1) To enhance the coverage of the Optic fiber network.
2) Expand into business areas that create synergies with company current business
3) Augment customer relationships
4) Enhance company project execution capabilities.
5) Continue to focus on strengthening the goodwill of company name.
Reasons to invest in an Dinesh Engineers IPO
1) Strong Revenue growth in the last 5 years, at 88% CAGR.
2) Company's margins are improving. Its profits grew at 80% CAGR in the last 5 years. However the margins got lower in FY16 and FY17 compared to earlier years, however recovered in FY18.
3) Company issue price is available attractive valuations.
Risk Factors / Reasons not to invest in a Dinesh Engineers IPO
1) The company is a party to certain legal proceedings. Any adverse decision in such proceedings may have a material adverse effect on company business, results of operations and financial condition.
2) Company results of operations are subject to significant fluctuations, and adverse weather conditions. Any adverse condition may hamper the company's ability to achieve or sustain profitability in the future, which may materially and adversely affect company business and prospects.
3) A significant portion of company revenue is generated from limited number of large customers and if they are unable to maintain company relationship with such customers, its business, results of operations and financial condition will be materially and adversely affected.
4) The market in which they operate is highly competitive, and if they are unable to compete effectively, its business, prospects and results of operations may be materially and adversely affected.
5) Majority of company customers operate in the telecommunications industry. Factors that adversely affect this industry or spending by companies within this industry may adversely affect company business.
6) Company Promoter Group Entities are engaged in the line of business similar to a company. There are no non – compete agreements between company and Promoter Group Entities. They cannot assure that company Promoter will not favor the interests of such entities over company interest or that the said entities will not expand, which may increase company competition and may adversely affect business operations and financial condition of the company.
7) Increase in wages payable to the employees and increases in operating costs in India may prevent us from sustaining company competitive advantage and may reduce company profit margins.
8) The conditions and restrictions imposed by company financing arrangements may limit its ability to grow company business and adversely impact company business.
9) Company net cash flows from operating, investing and financing activities have been negative in some years in the past. Any negative cash flow in the future may affect company liquidity and financial condition.
10) For complete internal and external risk factors, you can refer the DRP of the company.
Dinesh Engineers IPO Schedule
28th September – Offer Opens
3rd October – Offer Closes
9th October – Finalization of Basis of Allotment
10th October – Unblocking of ASBA
10th October – Credit to Demat Accounts
11th October – Listing on NSE & BSE
Dinesh Engineers IPO – Should you invest?
Let us look at the company valuations now. On FY2018 EPS of Rs 20.99 and on an upper price band of Rs 185, P/E works out to be 8.8x. On last 3 years average EPS of Rs 13.7, P/E works out to be 13.5x. Means company is asking the upper band of issue price of Rs 185 of P/E between 8.8x to 13.5x. There are no listed peers in the market doing similar business, hence we cannot ascertain whether the issue price is over priced or under priced. However P/E of 13x is low and considered to be attractively priced.
The company has strong revenue growth of 88% CAGR in the last 5 years. Its margins are on improvement mode. The issue price is also attractively priced. Considering all these positive factors, investors can invest in this IPO with 3-5 years time frame. One may expect listing gains too, though not guaranteed.
Disclaimer: I have an interest in investing in this IPO and above analysis is based on my personal views. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
Readers, would you like to invest in this IPO, which is attractively priced? Whats your view on this IPO?
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Dinesh Engineers IPO – Attractively Priced – Should you invest