Denta Water Ipo Gmp
Denta Water Ipo Gmp: Denta Water and Infra Solutions Limited, a Karnataka-based company specializing in water management infrastructure projects, has announced its Initial Public Offering (IPO) to raise approximately ₹220.50 crores. The IPO is scheduled to open on January 22, 2025, and close on January 24, 2025, with a price band set between ₹279 and ₹294 per equity share. Investors can apply in lots of 50 shares, making the minimum investment ₹14,700 at the upper price band.
Company Overview
Established in 2016, Denta Water and Infra Solutions focuses on designing, installing, and commissioning water management infrastructure projects, including groundwater recharging and lift irrigation systems. The company has completed 32 water management projects for the Government of Karnataka and, as of November 30, 2024, has an order book of ₹752 crores, representing 3.2 times its FY24 revenue.
Financial Performance
Denta Water has demonstrated significant financial growth over recent years. The company’s revenue from operations increased from ₹119.5 crores in FY22 to ₹238.5 crores in FY24. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) rose from ₹51.8 crores to ₹79.1 crores, while net profit surged from ₹38.3 crores to ₹59.7 crores during the same period.
Grey Market Premium (GMP) Denta Water Ipo Gmp
The Grey Market Premium (GMP) is an informal measure of the demand for an IPO before its official listing. As of January 21, 2025, Denta Water’s shares were commanding a GMP of ₹165 per share. This premium suggests a potential listing price of approximately ₹459 per share (₹294 + ₹165), indicating a 56% gain over the upper end of the price band Denta Water Ipo Gmp.
Utilization of IPO Proceeds
The company plans to utilize ₹150 crores from the IPO proceeds to meet its working capital requirements. The remaining funds will be allocated for general corporate purposes, adhering to applicable laws.
Risks and Considerations
While Denta Water’s financials appear robust, several factors warrant careful consideration:
Promoter Background: One of the promoters, C. Mruthyunjaya Swamy, a former secretary of the Public Works Department in Karnataka, was gifted a 25% stake in June 2023. There have been allegations and legal proceedings against him, which were subsequently disposed of.
High Profit Margins: The company’s EBITDA margin stood at 34%, and the PAT margin at 25% in FY24, which are unusually high for the engineering, procurement, and construction (EPC) sector. Such margins may raise questions about sustainability and accuracy.
Management Turnover: The resignation of two Chief Financial Officers in FY25 and one director in FY24 may indicate internal management challenges.
Regional Concentration: With operations primarily in Karnataka and 84% of H1FY25 revenue derived from the state government, the company’s performance is closely tied to regional political and economic conditions.
Conclusion
Denta Water and Infra Solutions Limited’s IPO presents an opportunity to invest in a company operating in the critical water management sector with demonstrated financial growth. However, potential investors should carefully assess the associated risks, including promoter background, high-profit margins, management turnover, and regional concentration, before making investment decisions.