Dilip Buildcon IPO opens today; are you subscribing?

Private sector based road focussed Engineering Procurement Construction contractor is all gearing up to open its IPO on Monday i.e. on August 1. Company plans to raise 650 crores. The issue comprises of fresh issue of Rs 430 crore and an offer for sale of 1.02 crore shares by promoters Dilip Suryavanshi and Devendra Jain and investor Banyantree Growth Capital LLC. Bids for the issue,  will close on August 3. The price band for the issue is Rs 214 – 219 per share.

Net proceeds from the fresh issue will be used for prepayment or scheduled repayment of a portion of term loans (around Rs 202.38 crore), working capital requirements (around Rs 200 crore) and general corporate purposes; while the company will not receive any proceeds from the offer for sale.

It would be far more interesting to watch the performance of the IPO which closes on August 3. However, looking at the earlier IPO’s of the year there is no doubt that the company IPO will be oversubscribed. But what will be more interesting to watch is the performance on the listing day. On the other hand, the company’s order books look quite strong with numerous government backed projects.

The company operates in two primary business verticals - construction (roads, irrigation and urban development projects contributed 92.7 percent to FY16 revenue) and infrastructure development (building, operation and development of road projects with a focus on annuity projects that accounted 7.3 percent to FY16 revenue).