Introduction
Denta Water and Infra Solutions Limited is set to launch its Initial Public Offering (IPO) to raise funds and expand its market presence. This blog provides a comprehensive overview of the IPO, delving into key details, company background, financial data, and more. By the end, investors will have a clear understanding of whether this IPO aligns with their investment strategy.
IPO Details
| Particulars | Details |
|---|---|
| IPO Price Band | ₹279 – ₹294 per equity share |
| IPO Size | Fresh issue of 7.5 million shares aggregating up to ₹220.5 crore |
| Market Lot | 50 shares |
| Minimum Investment | ₹14,700 (50 shares at ₹294) |
| Listing Exchanges | NSE and BSE |
| IPO Type | Book Building |
| Allocation | QIB (50%), NII (15%), Retail Investors (35%) |
IPO Timeline
| Event | Date |
|---|---|
| IPO Open Date | January 22, 2025 |
| IPO Close Date | January 24, 2025 |
| Basis of Allotment | January 27, 2025 |
| Refunds Initiated | January 28, 2025 |
| Shares Credited | January 29, 2025 |
| Listing Date | January 30, 2025 |
About Denta Water and Infra Solutions Limited
Denta Water and Infra Solutions Limited (Denta Water) as a key player in water management and infrastructure solutions in India, primarily focusing on groundwater recharging, lift irrigation, and EPC services. Here’s a detailed explanation:
Overview of Denta Water
Denta Water and Infra Solutions Limited is a company primarily engaged in providing engineering, procurement, and construction (EPC) services, particularly in the domain of water infrastructure. Since its inception in 2016, the company has emerged as a key player in the field, focusing on projects that contribute significantly to sustainable water management and infrastructure development in India. Over the years, it has developed a reputation for its specialized capabilities and innovative solutions aimed at addressing water scarcity, recycling, and efficient usage challenges.
- Key Achievements: The company is recognized for its contributions to the KC Valley project and Jal Jeevan Mission, which address critical water management and recycling needs.
- Expertise: It excels in using recycled water for groundwater recharging, infrastructure installations like jackwells, pipelines, pumping stations, and treatment plants.
In addition to its water infrastructure projects, the company has expanded its portfolio to include EPC services for other infrastructure needs such as road construction and railway projects. This diversification underscores its strategic intent to leverage its engineering and project management capabilities across multiple sectors. With its innovative approach and adherence to quality, Denta Water has positioned itself as a trusted partner for government bodies, private organizations, and communities in the realm of infrastructure development
Market and Environmental Context
- Groundwater Usage in India:
- India is the largest user of groundwater, with over 50% of rural areas depending on it for daily needs.
- Overexploitation has reduced the recharge capacity from 447 BCM to 432 BCM, highlighting the urgent need for conservation measures.
- Government Initiatives:
- Projects like Karnataka’s large-scale recycling schemes aim to recharge groundwater using treated municipal wastewater, providing drought-prone areas with sustainable water resources.
Project Highlights
- Completed Projects:
- Denta Water has successfully executed 32 water management projects.
- Key projects include lift irrigation systems and recycled water pumping to replenish lakes in districts like Kolar, Ramanagara, and Chikkaballapura.
- Ongoing Projects:
- As of November 2024, 17 projects are in progress, with a total contract value of ₹11,004.36 million, encompassing ₹10,667.52 million in water management.
- Here is the order book details of this company:
| Sr. No. | Project Segment | No of Projects | Contract Value (₹ in crore) |
|---|---|---|---|
| 1 | Road | 1 | 5.85 |
| 2 | Water Management | 11 | 1,066.75 |
| 3 | Railways | 5 | 27.83 |
| Total | 1,100.43 |
Business Operations
- Competitive Bidding:
- Contracts are secured through transparent state and central government tenders.
- Denta Water operates as both a main contractor and a subcontractor.
- Service Offerings:
- A “concept-to-commissioning” model, including feasibility studies, design, consultancy, project management, and maintenance.
Management Team
Denta Water and Infra Solutions Limited is guided by a team of experienced leaders and skilled professionals dedicated to driving the company’s growth. The company’s promoter, Mr. C Mruthyunjayaswamy, brings over 38 years of expertise in the civil sector, having worked extensively in planning and executing projects in areas like water management, road development, irrigation, and rural infrastructure. His work has included creating project reports, conducting field training, and raising awareness about critical topics such as water conservation, efficient water usage, and sustainable agriculture practices. Notably, he has been recognized for his innovative contributions to groundwater recharge projects.
Financial and Operational Performance
- Revenue and Order Book:
- By November 2024, completed project revenues amounted to ₹3,479.85 million, with an outstanding order book worth ₹7,524.51 million.
- Diverse Portfolio:
- Apart from water projects, Denta Water undertakes infrastructure development for railways and highways.
Financial Performance
| Particulars | Six months period ended September 30, 2024 | Fiscal 2024 | Fiscal 2023 | Fiscal 2022 |
|---|---|---|---|---|
| Revenue From Operations (₹ Cr) | 97.78 | 238.60 | 174.32 | 119.57 |
| Total Income (₹ Cr) | 98.51 | 241.84 | 175.75 | 119.64 |
| Operating EBIDTA (₹ Cr) | 32.77 | 79.14 | 66.96 | 51.81 |
| Operating EBIDTA Margin (%) | 33.51% | 33.17% | 38.41% | 43.33% |
| Restated Profit After Tax (PAT) (₹ Cr) | 24.20 | 59.73 | 50.11 | 38.34 |
| PAT Margin (%) | 24.75% | 25.03% | 28.75% | 32.06% |
| ROE (%) | 12.84% | 36.36% | 47.93% | 70.43% |
| ROCE (%) | 18.96% | 76.99% | 95.98% | 126.60% |
| Debt/Equity Ratio | 0.00 | 0.01 | 0.01 | Nil |
SWOT Analysis
| Strengths | Weaknesses |
|---|---|
| Established expertise in water infrastructure. | Dependence on government contracts for revenue. |
| Robust financial performance with steady growth. | High working capital requirements. |
| Focus on sustainable water solutions. | Limited diversification in customer segments. |
| Opportunities | Threats |
|---|---|
| Expanding water infrastructure demand in India. | Economic slowdown affecting public projects. |
| Scope for technological innovation in water tech. | Competition from established global players. |
Future Outlook
Denta Water is poised for sustained growth due to:
- Rising national focus on infrastructure and water management.
- Expansion in Karnataka’s water management projects and lift irrigation initiatives.
- The critical role of water as a diminishing yet vital resource, ensuring a stable demand for the company’s services.
Objects of the Issue
The proceeds from the IPO will be allocated as follows:
- Working Capital Requirements: ₹150 crore to support ongoing and future projects.
- General Corporate Purposes: Remaining funds will be used for branding and operational improvements.
Peer Comparison:
As per the offer document, the company has shown VA Tech Wabag, and EMS Ltd., as their listed peers.
| Company | EPS Basic | EPS Diluted | NAV | P/E(x) | RoNW |
|---|---|---|---|---|---|
| Denta Water and Infra Solutions Ltd | 31.11 | 31.11 | 85.55 | 9.3 | 36.36 |
| Va Tech Wabag Ltd. | 39.49 | 39.49 | 292.43 | 38.41 | 13.77 |
| EMS Limited | 29.38 | 29.38 | 143.73 | 27.47 | 19.13 |
- Verdict: Denta Water offers a reasonable valuation compared to its peers, but its smaller market share and higher dependency on government contracts might pose risks.
Valuation of the Company in this IPO
Price-to-Earnings (P/E) Ratio: At ₹294, the P/E ratio is 9.3x based on FY24 earnings.
- Industry P/E Ratio: The average industry P/E stands at 32.94x.
- Valuation Insight: The IPO valuation is competitive, providing potential upside if the company sustains its growth trajectory and reduces dependency on public sector projects.
Conclusion
Denta Water and Infra Solutions Limited’s IPO presents an opportunity to invest in a niche segment with high growth potential. With a robust financial track record and a focus on sustainability, the company is well-positioned for long-term growth. However, investors should carefully assess the risks, such as high dependency on government contracts and competition from larger players.
FAQs
- What is the price band for the Denta Water IPO?
The price band is ₹279-₹294 per equity share. - What are the key risks in this IPO?
Dependency on government contracts and high working capital requirements are notable risks. - When will the IPO be listed?
The shares are expected to be listed on January 30, 2025. - How does Denta Water compare to its peers?
While the company is smaller in scale, its competitive valuation and focus on sustainability make it an attractive option.
