dilip buildcon

(To be updated further, Last Update  01/8/16 )

IPO Date    :  The IPO will open on 1 August and close on 3 August

Price Band  :  Rs.214-219 per share

Lead Manager :  Axis Capital Ltd, IIFL Holdings, JM Financial, PNB Investment Services

Issue Size : Fresh issue of equity shares aggregating up to Rs 430 crore and an offer for sale of up to 1,136,364 equity shares by promoters  Dilip Suryavanshi, up to 1,136,364 equity shares by Devendra Jain and up to 7,954,545 equity shares by the BanyanTree Growth Capital, LLC

About the Company : Dilip Buildcon Ltd  is a Bhopal based mid-sized construction company and roads developer . Private equity fund BanyanTree Growth Capital which currently holds about 9.75% in the company, will sell about 6% stake through the IPO.

Dilip Buildcon started with a real estate construction business in 1989 , and later forayed into water treatment and sewage treatments. It mainly builds projects across roads, dams, canals and residential buildings on EPC (engineering, procurement, and construction) basis.   While Its main focus is on construction of state and national highways, city roads & bridges, it has entered into  irrigation and urban development projects as well.. The Company  has around 19700 employees and  owns large fleet of construction equipment ( over 7300 vehicles).During  last 5 years, this company has completed the construction of 50 road projects in 5 states eg  MP, Gujarat, Himachal Pradesh, Rajasthan and Maharashtra of about  5,858 lane kms.  The company has aggregate order book position of Rs. 10778 crores consisting of  50 EPC road projects,  6 of its own BOT projects,  3 irrigation projects, one mining project and 3 projects under Urban development  segment.

Financials:

Particulars Year Ending
2016 2015 2014 2013
Revenue from Operations 4,315.36 2,761.95 2,383.79 1,919.49
Revenue Growth (%) 56.24% 15.86% 24.19%       –
EBITDA 1,029.10 693.2 542.6 480.7
EBITDA Margin 23.80% 25.00% 22.60% 24.90%
Profit Before Tax 230.79 133.2 241.7 289.75
Net Profit 196.65 87.66 185.69 241.29
Net Profit  Margin 4.56% 3.17% 7.79% 12.57%
EPS 16.79 8.19 17.56 22.82
Share Capital 117.14 117.14 59.24 59.24
Net Worth 1000.27 805.22 719.02 534.76
RoNW (%) 19.64% 10.89% 25.83% 45.12%

PE at upper price band of   219 works out to be 13.04.  On expanded equity of  136.7 cr Post IPO, the PE ratio works out to be 15.2

Peer comparison:

Name Dilip Buildcon IRB Infra. IL&FS Transport PNC Infratech Ashoka Buildcon Sadbhav Engg Gaytri Projects
CMP / Issue Price 219 216.95 80.35 564.3 162.7 299.95 626.9
Sales 4,315.36 5,128.15 8,254.84 2,014.15 2,614.48 3,186.25 1,812.21
Operating Profit 995.502 2,784.55 3,235.39 286.11 824.25 350.66 266.06
OPM  % 23.07 54.3 39.19 14.2 31.53 11.01 14.68
Equity  Capital 117.14 351.45 328.96 39.81 93.57 17.15 30.23
Net worth 1000.27 4,360.86 6,316.90 718.44 1,868.75 1,352.06 682.54
EBIT 1,029.10 1,931.22 2,960.01 233.65 518.06 246.28 228.59
Net Profit 196.65 635.83 311.54 242.74 58.45 133.71 58.65
NPM  % 4.56 14.11 3.77 6.43 2.24 3.83 1.38
EPS 16.79 18.09 9.47 60.97 6.25 7.79 16.54
PE 13.04 11.99 8.48 11.93 33.13 34.19 37.89
Debt / Equity 3.22 2.88 4.38 0.49 2.29 0.81 2.61
Interest Coverage 2.23 1.82 1.17 7.03 1.16 2.86 1.45

On Post Issue equity the equity capital the PE of copmany shall increase as follows

Post issue equity 136.70 cr
PE 15.22

Assessment :  (To be updated further)

  • Dilip Buildcon is in building of roads, bridges, dams, canals, water supply etc. and has orders worth Rs 17,530 crore, across 12 states. The company has grown from Rs 1,192 crore in 2012 to Rs 4349 crore in 2016.
  • The Road sector is witnessing fresh interest government is planning to award 25,000km of road projects in 2016-17, compared with 10,000km in 2015-16. Given the robust order boo, the company  should be able to earn good profit margins over next few
  • Apart from constructing roads, the company has also undertaken projects in the irrigation and urban development sectors. In irrigation business it specialises in building dams and canals, while in the urban development sector it is into constructing buildings and urban amenities. Dilip Buildcon  has recently bagged a coal mining contract.
  • Dilip Buildcon has got order to build India’s second longest cable bridge in Goa
  • There have been some reports that promoters are close to BJP party and have grown considerably in MO during rule of BJP. There also have been an income tax raid on the group in the past.
  • It is common for infrastructure players to struggle with heavy debt burden. The ratio Debt to equity which is total outstanding Debt divided by Net worth along with Interest coverage ratio (Interest Outgo / PBIT) are better indicators of financial health of the company.
  • The interest coverage ratio is a good indicator for this sector and indicates how easily a company can pay interest expenses on outstanding debt. Both these ratios though are a tad higher than comfort level for the company,  Dilip Buildcon plans to sell some of its BOT projects to bring down the debt.  . The IPO also could bring down these ratio slightly down due to infusion of funds and equity.
  • Promoter Dilip Suryavanshi has pledged 4.62 percent of the pre-Issue share capital, in favor of IFCI for loans of an aggregate value of Rs 200 crore to company.
  • The company has a higher interest costs vis a vis its competitors and company’s debt has increased.
  • The company has a higher working capital cycle of 205.4 days which is much higher than its peers.
  • Dilip Buildcon with   PE of 15.2 as compares favourably with players like Ashoka Buildcom, Sadbhav engg and Gayatri  Projects which are being valued at a higher PE. However others like IRB Infra are at a slightly lower PE.
  • The company has invested considerably into plant and machinery needed for construction activities.
  • The company has received early completion bonuses 1 of its BOT projects and about 10 government EPC projects which speak well for its execution.
    Infrastructure companies are prone to debt trap and despite good outlook the sector has some inherent risks. Though there is a reasonable possibility that the IPO can give some little upside to the investors but there are risks of no profit or small loss too. Investors will have to track the upcoming response and other developments carefully. The IPO lacks the class and strength of likes of Equitas, Ujjivan, Quess, Mahanagar, Advanced Enzyme etc.  but may be worth a risk.
  • A good order book coupled with a good record of completing most projects in time or before time speaks well about the company but debts are quite high and overall  high interest costs poses a major risk and have been eating away considerable profit margin.
  • The profit margin has fallen from around 9 per cent in 2011-12 to around 5 per cent in 2015-16. Also, while revenue have been growing,  profits have been subject to considerable volatility.
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