DEE Development Engineers IPO 2024: In the realm of industrial operations, efficient and reliable process piping systems form the backbone that enables the seamless transportation of raw materials, intermediates, and finished products. One such company that plays a crucial role in this industry is DEE Development Engineers Limited.

The IPO will open for subscription on June 19, 2024, and close on June 21, 2024. In this article, we will look at DEE Development Engineers IPO 2024 and analyze its strengths, weaknesses, financials and GMP. Keep reading to find out!  

DEE Development Engineers IPO Review – Company Overview

Established in 1988, DEE Development Engineers Limited is an engineering company that specializes in providing process piping solutions for oil and gas, power (including nuclear), chemicals, and other process industries. They offer engineering, procurement, and manufacturing services.

The company also manufactures and supplies a wide range of piping products, including 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 various accessories such as boiler superheater coils, de-superheaters, and other customized components.

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DEE Development Engineers Limited operates seven manufacturing facilities in Palwal, Haryana; Anjar, Gujarat; Barmer, Rajasthan; Numaligarh, Assam; and Bangkok, Thailand. In addition, they have three manufacturing facilities located in Palwal, Haryana.

Furthermore, the company has recently diversified its business by venturing into the design, engineering, fabrication, and manufacturing of pilot plants at Palwal Facility III.

Over the decades the company has developed strong relationships with its customers, including global companies such as JGC Corporation, Nooter Eriksen, MAN Energy Solutions SE, Mitsubishi Heavy Industries, and John Cockerill S.A, 

The customer base from India includes companies such as Reliance Industries Limited, Thermax Babcock & Wilcox Energy Solutions Limited India, Toshiba JSW Power Systems Private Limited, UOP India Private Limited, HPCL–Mittal Energy Limited, Doosan Power Systems India Private Limited and Andritz Technologies Private Limited.

DEE Development Engineers IPO Review – Industry Overview

A process piping system is a specialized piping system used exclusively in industrial plants to transport input materials for the production process. Process piping carries raw materials or finished products to their intended locations, such as reaction vessels, containers, storage tanks, or other equipment for further treatment or processing.

The global market for process piping solutions is projected to reach USD 54.5 billion by the end of the decade, growing at a CAGR of 4.8% from 2023 to 2030. In FY 2023, the process piping solutions market in India generated an annual turnover of approximately INR 25.4 thousand crores.

It is expected that by FY 2030, the annual turnover in the Indian process piping solutions market will reach INR 38.4 thousand crores growing at a CAGR of approximately 6.1% between FY 2023 and FY 2030. This demand for process piping solutions is directly linked to the capital expenditure patterns in the industrial segment.

DEE Development Engineers IPO Review – Financial Highlights

If we look at the financials of DEE Development Engineers Limited we find out that we can see its revenues have increased from ₹495.21 crores in FY21 to ₹595.49 crores in FY23. Although there was an increase in the revenues of the company, its net profits have declined from ₹14.2 crores to ₹12.9 crores from FY21 to FY23. This decline can mainly be attributed to its rising raw material costs.

As of nine months ended of FY24, the company has earned a revenue of ₹545.55 crores and has retained a profit of ₹14.33 crores. As the company operates in a capital-intensive sector, it gives low returns to its shareholder’s equity and has low efficiency in the utilisation of its resources. As of FY23, the company reported an ROE of 3.35% and an ROCE of 3.91%.

Furthermore, due to the huge funds it requires to operate, its borrowings have increased every. From FY21 to Q3FY24, the company’s borrowings have increased from ₹224.67 crores to ₹371.05 crores. however, the net debt-equity during Q3FY24 was reported at 0.85 which means the company still operates majorly on its own equity.

The below table shows you the key financial metrics of DEE Development Engineers:

Financial metrics of DEE Development Engineers
Source: RHP of the company

Competition faced by the company

The company faces competition from companies such as ISGEC Heavy Engineering Limited in certain segments and from the pipe fabrication division of L&T Heavy Engineering in certain areas of its operations, in India 

Furthermore, the company also faces competition from international companies such as Seonghwa Industrial Co. Limited, SUNG IL (SIM) Co Ltd, US Pipe Fabrication and McDermott which either operate in the same line of business or offer similar products and services.

Strengths of the Company

  • The company holds a leadership position in the industry which offers it competitive advantages like product pricing, reduced costs due to economies of scale, ability to scale the business and customer loyalty.
  • With over three decades of experience, the company has developed long-standing relations with customers across various industries. This equips the company to retain its presence in the market and build upon these relationships to increase its product base and reach out to new customers.
  • The company has a wide range of specialized product offerings and services making it a comprehensive solution provider for its
  • This allows the company to have limited dependence on individual products and addresses different business cycles across industries.
  • The company is the largest provider of process piping solutions in India, with the highest installed capacity and strategically located state-of-the-art Manufacturing Facilities.
  • The company’s focus on the product upgrading process and technology enables it to manufacture products in an energy and cost-efficient manner. Furthermore, its in-house engineering and design teams reduce its dependence on outsourcing engineering, design and non-destructive examination work to third-party consultants.

Weaknesses of the Company

  • The company’s business is heavily dependent on its customers who operate in the oil and gas, power (including nuclear), process industries and chemical sectors. Any downturn in any of these sectors can adversely affect the company’s business.
  • The company’s derives a significant portion of its revenues from its top 10 customers(70.9% as of FY23). Furthermore, the company has no long-term contracts with these customers. Therefore, the cancellation of orders from any of these customers can adversely affect the company’s business
  • The company faces competition from both domestic as well as multinational companies that may provide lower-cost solutions to customers in order to acquire more market share.
  • The major percentage of the company’s expenses comprise the raw materials cost. Any further increase in these costs can adversely affect the margins of the company.
  • The company operates in a capital-intensive industry and may require a significant amount of capital for its expansion in the future. Failure to procure such funds can have an adverse effect on the business.

DEE Development Engineers IPO Review – GMP

The shares of DEE Development Engineers traded at a premium of 20.20% in the grey market on June 14, 2024. The shares tarded at Rs.244. This gives it a premium of Rs. 41 per share over the cap price of Rs 203. 

DEE Development Engineers IPO Review – Key IPO Information

ParticularsDetails
IPO Size₹418.01 Cr
Fresh Issue₹93.01 Cr
Offer for Sale (OFS)₹325.00 Cr
Opening dateJune 19, 2024
Closing dateJune 21, 2024
Face Value₹10 per share
Price Band₹193 to ₹203 per share
Lot Size73 Shares
Minimum Lot Size1
Maximum Lot Size13 (949 shares)
Listing DateJune 26, 2024

Book Running Lead Manager: SBI Capital Markets Limited and Equirus Capital Private Limited

Registrar to the Offer: Link Intime India Private Limited 

Promoters of the Company: Krishan Lalit Bansal, Ashima Bansal And Dde Piping Components Private Limited

The Objective of the Issue

The net proceeds from the fresh issue made by the company will be utilized for the following purposes:

  1. Funding the working capital requirements of the company
  2. Complete or partial repayment or prepayment of the borrowings availed by the company
  3. General corporate purposes.

Conclusion

In this article, we looked at the details of DEE Development Engineers IPO Review 2024. DEE Development Engineers Limited is a well-established player in the process piping solutions industry. While the company faces competition from domestic and international rivals, its leadership position, diverse product offerings, and long-standing customer relationships position it favourably.

However, the capital-intensive nature of the business, raw material cost fluctuations, and customer concentration risks are factors to consider. What do think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.

Written by Aaron Vas

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