IPO for DEE Piping Systems Employee Oversubscription Gets Things Started Strong; Positive Gray Market Signals

Leading producer of specialty pipe goods, DEE Piping Systems, has received positive feedback for its initial public offering (IPO), particularly from its workforce. While the total subscription has not yet reached halfway, the employee-reserved portion has already received oversubscription.

DEE Piping Systems shares are selling at a 39.41% premium in the gray market, at a premium of ₹80 above the IPO’s upper price band, which is set between ₹193 and ₹203 per share. Experts in the market advise prospective investors to pay more attention to the company’s overall performance and financial fundamentals than to merely gray market indicators.

With a lot size of 73 shares, the IPO hopes to collect ₹418 crore. Employees would receive a discount of ₹19 per share. 15% of shares are allocated to individual investors, 35% to non-institutional investors (NIIs), and 50% to qualified institutional buyers (QIBs). The company’s stock is anticipated to list on the BSE and NSE on June 26 once the share allocation is finalized on June 24.

A new issue of shares priced at ₹325 crore and an offer for sale (OFS) of 45.82 lakh shares valued at ₹10 apiece are included in the IPO. The proceeds from the new issue will be utilized for general company objectives, debt repayment, and working capital requirements. The selling stockholders will get money from the OFS.

Background of the Company and Its Financial Situation

Known for its specialist process piping solutions, DEE Development Engineers provides services to the chemical, oil and gas, power (including nuclear), and other process industries. Seven manufacturing sites are owned by the company: three are located in Palwal, Haryana; the remaining four are in Bangkok, Thailand; Anjar, Gujarat; Barmer, Rajasthan; and Numaligarh, Assam. In terms of installed capacity, DEE Development Engineers is the biggest supplier of process piping systems in India.

Over the past few years, the company’s financial performance has fluctuated. It reported a net profit of ₹14.21 crore for FY21, but that figure fell to ₹8.20 crore for FY22 and then increased to ₹12.97 crore for FY23. DEE Piping Systems’ sales increased at a compound annual growth rate (CAGR) of more than 9% during that same period, totaling ₹614.32 crore. The business recorded sales of ₹557.86 crore and a net profit of ₹14.34 crore for the nine months that ended in December 2023.

Important Information about the IPO

Dates of the IPO: June 19–21 are open.

Pricing Range: ₹193 to ₹203 per share, with an employee discount of ₹19.

Lot Size: 73 shares; retail investors must invest a minimum of ₹14,819 to participate.

IPO Size: ₹418.01 crore at the higher price range, comprising ₹93.01 crore for the OFS component and ₹325 crore for a new issue.

15% for NIIs, 35% for retail investors, and 50% for QIBs are reserved.

Dates of Allocation and Listing: June 24 for allocation; June 26 for listing.

The goal is to pay off debt and support regular business needs as well as working capital requirements.

BRLM and Registrar: Link Intime India Private Ltd is the registrar, and SBI Capital Markets and Equirus Capital are the book running lead managers.

GMP: In the gray market, shares are trading at a ₹50 premium, which represents a 24.63% increase above the IPO price.

In conclusion, potential investors should think about the company’s financial health and market fundamentals before making investment decisions, even if DEE Piping Systems’ IPO has received strong initial support, especially from employees.