DEE Development Engineers IPO vs Akme Fintrade IPO | Which One Should You Bet On?

Two mainboard Initial Public Offerings (IPOs)—DEE Development Engineers Ltd and Akme Fintrade India Ltd—have hit the street today, aiming to collectively raise ~Rs 550 crore. These IPOs will close for subscription on June 21. In their pre-IPO rounds, DEE Development Engineers successfully garnered Rs 125 crore while Akme Fintrade secured Rs 38 crore from anchor investors.

These IPOs are drawing significant interest from investors, highlighted by a grey market premium (GMP) of ~40% and strong subscription numbers. Here's a detailed breakdown of both offerings to help you decide which IPO might be the better bet.

1. DEE Development Engineers Ltd: A Leader in Process Piping Solutions

DEE Development Engineers Ltd (DEE) specializes in process piping solutions, serving industries like oil and gas, power, and chemicals. The company operates out of seven facilities in India and Thailand, boasting an installed capacity of 70,875 MT.

Key Strengths

• Financial Overview: DEE exhibits a steady financial growth, with a 10% CAGR in operational revenue from FY21 to FY23. The firm boasts a robust order book of ~Rs 829 crore, which provides strong revenue visibility.
• Market Leadership: As the largest player in its segment in India, DEE offers reliability and expertise in handling complex industrial requirements.
• Distinguished Clientele: DEE serves renowned global and Indian firms like JGC Corporation, Mitsubishi Heavy Industries, Reliance Industries, etc, enhancing its market credibility.

Key Risks

• High Customer Concentration: A substantial portion of revenue comes from a limited number of clients, posing potential risks.
• Aggressive Valuation: The IPO is priced at a P/E ratio of 73x based on projected FY24 earnings post-IPO, which is pricey given the current market dynamics.

2. Akme Fintrade India Ltd: Financing the Underserved Markets

Akme Fintrade, a non-banking financial company, focuses on vehicle and business loans in rural and semi-urban areas. It operates through 12 branches across four states in India.

Key Strengths

• Focused Approach: Akme targets underserved markets, with a strong emphasis on secured loans and comprehensive borrower assessments.
• Market Potential: With a focus on rural and semi-urban areas, Akme taps into a segment with significant growth potential.
• Secured Loan Portfolio: The emphasis on collateralized loans enhances the security of its loan portfolio.

Key Risks

• Pandemic Impact: The COVID-19 pandemic significantly affected Akme's business, leading to a considerable decline in revenues, disbursements and AUM. The firm has not yet returned to its pre-pandemic levels of business and earnings.
• Geographical Concentration: A significant portion of Akme’s business is concentrated in Rajasthan, exposing it to regional risks.
• Return Metrics: Akme's ROE stood at a modest 5.6% for 9MFY24, which is considerably lower than that of its competitors.

Which IPO Should You Bet On?

Investors looking for a stable company with a clear growth trajectory may find DEE Development Engineers Ltd appealing due to its leadership in a niche market and better fundamentals. For those willing to take on more risk for potentially quick gains, Akme Fintrade may be worth considering, though its geographic concentration and operational risks should be carefully weighed.

Ultimately, both IPOs offer different value propositions depending on one’s risk tolerance and investment timeline. It’s important to align your choice with your overall financial objectives and risk appetite. For long-term investors, DEE’s role in the expanding process piping market could provide sustained growth, while Akme’s potential for quick listing gains could appeal to those looking for shorter-term opportunities.

For more detailed insights on these IPOs, dive into: IPO Corner | Liquide

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