Denta Water & Infra Solutions IPO Analysis 2025: Should You Subscribe?
Get a detailed overview of Denta Water & Infra Solutions IPO, including GMP, Subscription Status, Financial Analysis, Risk Factors and Expert Verdict.
Denta Water & Infra Solutions Ltd (DWISL) launched its initial public offering (IPO) on January 22, 2025, with bidding set to close on January 24, 2025. The IPO, carrying a grey market premium (GMP) of 44%, has received a solid response from investors so far.
However, one should get a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.
Denta Water & Infra Solutions IPO Details
- Issue Details: Mainstream
- Issue Size: Rs 220.50 crore
- Price Band: Rs 279 – Rs 294
- Lot size: 50 shares
- Listing Date: January 29, 2025
Denta Water & Infra Solutions IPO Subscription Status
The DWISL IPO garnered a solid response, with an overall subscription of 17.29 times on its opening day. y 5 pm on the second day of bidding, the subscription soared to 50.64 times.
Non-institutional investors led the charge, oversubscribing their allocated shares by a remarkable 128.42 times. Retail investors also showed strong interest with a 43.52 times subscription, while qualified institutional buyers (QIBs) recorded a 4.75 times subscription rate.
Overview of Denta Water & Infra Solutions Ltd
Incorporated in 2016, DWISL is a leading player in water engineering, procurement, and construction (EPC), specializing in groundwater recharging and lift irrigation projects. It is one of the few Indian companies with expertise in designing, installing, and maintaining groundwater recharging systems using recycled water.
In addition, the firm also undertakes infrastructure projects in railways (upgrading infrastructure) and highways (roads and bridges construction).
Denta Water & Infra Solutions Key Strengths
- Proven Track Record: As of November 30, 2024, DWISL has successfully completed 35 projects worth Rs 238 crore, with no instances of time or cost overruns.
- Established Expertise: DWISL has built a strong reputation in water management solutions, particularly in groundwater recharge (GWR) and lift irrigation projects. By November 30, 2024, the company secured contracts totalling Rs 774 crore as a consortium partner, Rs 47 crore as an independent contractor, and Rs 466 crore as a subcontractor in GWR projects.
- Impressive Financial Growth: DWISL has demonstrated robust financial performance with a compounded annual growth rate (CAGR) of 41% in operational revenue, 24% in EBITDA, and 25% in net profit between FY22–FY24.
- Superior Financial Metrics: As of FY24, DWISL outperforms its listed peers with an EBITDA margin of 33.29% and a PAT margin of 25.03%. Additionally, the company boasts a high Return on Equity (RoE) of 36.36% and a Return on Capital Employed (RoCE) of 76.99%, reflecting its strong financial position.
- Robust Order Book: With a total contract value of approximately Rs 1,100 crore, DWISL has completed work worth Rs 348 crore and maintains an outstanding order book of Rs 752 crore, ensuring solid revenue visibility.
Denta Water & Infra Solutions Risk Factors
- Regulatory Complaints: Anonymous complaints filed with SEBI and other authorities against DWISL and its promoter, C. Mruthyunjaya Swamy, allege corrupt practices, misuse of authority, and influencing officials to secure contracts. Further developments in these complaints could adversely impact the firm’s business and operations.
- Dependency on Government Clients: DWISL heavily relies on government clients for revenue, with contributions increasing from 18.25% in FY23 to 63.4% in FY24. Furthermore, nearly 84% of its revenue in H1FY25 came from the Government of Karnataka.
- High Attrition Rate: DWISL has faced considerable attrition among Directors and Key Managerial Personnel, including the resignation of two Chief Financial Officers in the past year. Challenges in retaining key personnel could adversely affect its operations, financial performance, and cash flow management.
- Client Concentration: A significant portion of DWISL's revenue is derived from a few key clients. As of FY24, the top ten customers accounted for 69% of the total revenue, exposing the firm to client concentration risk.
- Cash Flow Concerns: DWISL has reported negative cash flows from operating activities in H1FY25 and FY22. Continued negative cash flow trends could hamper the firm’s operational efficiency and financial stability.
Conclusion: Should You Subscribe to Denta Water & Infra Solutions IPO?
DWISL has shown impressive growth in revenue and profits in recent years and boasts the highest margins among its peers. The Indian water and wastewater treatment market is expected to grow at a healthy CAGR of 6.2% from 2023 to 2033, providing promising opportunities for DWISL, which focuses on water management projects.
With a P/E ratio of 9.5 based on FY24 earnings, the IPO appears attractively priced. Furthermore, the grey market premium (GMP) suggests a strong listing performance.
Considering the company’s robust order book, consistent financial performance, and industry-leading margins, investors may consider subscribing to the IPO from a long-term perspective.
For a deep dive into other IPOs, explore: IPO Corner on Liquide