Dilip Buildcon makes a smart debut

The new debutant on the market today was Dilip Buildcon. As against the IPO price of Rs.219, the stock got listed at Rs.240, going up to Rs.253. It is currently hovering at Rs.249 levels, a premium of 14% over issue price.

The stock has got a fantastic response to its IPO, subscribing 20.95 times.

Dilip Buildcon, a road EPC player with nearly 2/3rd business coming from Madhya Pradesh, has a fleet size of 7,345 construction equipments. Having diversified into irrigation and urban development, company’s current order book (31-3-16) stands at Rs. 10,779 crore, of which, 85% is roads, comprising of 50 third party road EPC projects and 6 own BOT projects, among others.

In our New Issue Analysis we had said, “Low single digit net margins, leveraged balance sheet and excess funds being locked in working capital in the intensely competitive road construction industry, along with rich valuations make the issue unattractively. On fundamentals, one can, thus, give it a miss.” Here, we are looking at the listing gains only today, what is questionable is the sustainability of this price.