Deepak Builders & Engineers IPO: 10 key risks investors should know before subscribing to the ₹260 crore issue | Stock Market News

Deepak Builders & Engineers IPO: The initial public offering (IPO) of Deepak Builders & Engineers India opened for subscription on Monday, October 21, and will remain so till Wednesday, October 23.

The ₹260.04 crore book-built issue, which has a price band fixed at ₹192 to ₹203 per share, is witnessing a decent response. By 10:30 am on the first day of subscription, the issue had seen an overall subscription of about 0.36 times, with the retail portion booked 0.60 times and the segment reserved for non-institutional investors (NIIs) subscribed 0.29 times.

After subscription, the company is expected to finalise share allotment on Thursday, October 24, and successful bidders may expect shares into their demat accounts on Friday, October 25. The stock may debut on the BSE and NSE on Monday, October 28.

The last grey market premium (GMP) of Deepak Builders & Engineers indicates the stock could list at a premium. According to market sources, the last GMP of the stock was ₹60 and considering the upper price band of the issue of ₹203, the estimated listing price of the stock is ₹263, a premium of 29.56 per cent.

The company has outlined several key risks in its Red Herring Prospectus (RHP). Here are 10 major risks that investors should consider before subscribing to the issue:

Deepak Builders & Engineers IPO: Key risks

1. The company’s revenue is majorly concentrated from projects undertaken or awarded by government, semi-government and government-controlled entities.

“Any adverse changes in government policies may lead to our contracts being foreclosed, terminated, restructured or renegotiated, which may have a material effect on our business and results of operations,” said the company.

2. The company’s portfolio is concentrated on certain large-scale projects. Any delay or impediment to such projects may adversely impact its financial position. Besides, its project portfolio has historically been concentrated in Punjab, India. Any changes affecting the policies, laws and regulations or the political and economic environment in the region may adversely impact its business, financial condition and results of operations.

3. The company said its ongoing projects are exposed to various implementation risks and uncertainties and may be delayed, modified or cancelled for reasons beyond our control, which may adversely affect its business, financial condition and operation.

4. According to RHP, the company has seen sustained negative cash flows from operating activities in the past, and it may experience earnings declines, operating losses or negative cash flows from operating activities in the future

5. The company earns a significant portion of its revenues from a limited number of clients. The loss of any significant clients may hurt its business, financial condition, results of operations, and prospects.

6. The company operates in the highly competitive construction industry, which has low entry barriers. Failure to compete successfully may adversely affect the company’s business, financial condition, and operations.

7. The company’s business is working capital intensive, involving relatively long implementation periods. Insufficient cash flows for debt payments or fund working capital requirements may adversely impact its operations.

8. Promoters Deepak Singal and Sunita Singal have pledged some of their shares, which may be enforced in the event of the company’s default.

9. The company is subject to risks arising from interest rate fluctuations, which could reduce the profitability of its projects and adversely affect its business, financial condition and operations.

10. The company said there may have been instances of non-compliance with certain corporate actions it took in the past. Consequently, it may be subject to regulatory actions and penalties.

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