IPO Note : Denta Water & Infra Solutions Ltd By Geojit Financial Services Ltd
An expert in ground water recharge solutions
Denta Water and Infra Solutions Ltd. (DWISL) specializes in the design, installation, and commissioning of water management projects, with a primary focus on groundwater recharge solutions. Established in 2016 and based in Bangalore, Karnataka, DWISL also undertakes construction projects within the railway and highway sectors, leveraging its expertise to deliver high-quality infrastructure solutions.
* The Indian water and wastewater treatment market is expected to grow at a CAGR of 6.20% in terms of value to reach USD 24 billion in 2033 from USD 13 billion in 2023. (Source: Marketysers Global Report, RHP)
* Denta’s revenue increased from Rs 119.6cr in FY22 to Rs 238.6cr in FY24, achieving a CAGR of 41.3%, primarily driven by an increase in revenue from ongoing projects as well as the completion of pending orders during the year.
* The company’s EBITDA grew from Rs 51.8cr in FY22 to Rs 79.1cr in FY24 with a CAGR of 23.6%. PAT increased to Rs 59.7cr, reflecting a CAGR of 24.8% over the same period.
* The company primarily relies on government contracts, with 63.4% of its revenue in 2024 coming from the Government of Karnataka.
* As of late 2024, Denta Water has an order book worth Rs 784.2cr. The order book to sales ratio for FY24 is 3.2x, ensuring healthy revenue visibility over the medium term.
* Denta’s ROE stood at 36.3% and EBITDA margin is 33% in FY24, which is superior compared to its peers. The debt-to-equity ratio is 0.01x in FY24, reflecting strong financial stability.
* DWISL operates on an asset-light business model by outsourcing equipment requirements, focusing on joint development agreements or joint ventures that require lower upfront capital expenditure, and assigning part of the work to subcontractors.
* At the upper price band of Rs 294, Denta is available at a P/E of 16.2 (FY25 Annualised), which is at a discount compared to its listed peers. The company’s focus on water management projects and growing market opportunities present significant prospects for the company's future growth. With a robust order pipeline and consistent financial performance featuring industry-leading margins, the company is set for future success. We recommend subscribing to this issue for short- to mediumterm investment.
Purpose of IPO
The IPO consists of fresh issue of Rs 220.5cr. The proceeds from its fresh issuance will be utilised for (i) meeting working capital requirements of the Company (Rs 150 cr), (ii) General corporate purposes, subject to the applicable laws.
Key Risks
* Rely substantially on the government contracts.
* Any delays in project completion or time overruns could adversely affect the company's business prospects and operational performance.
