DMR Hydroengineering & Infrastructures coming with an IPO to raise upto Rs 2.09 crore

DMR Hydroengineering & Infrastructures

• DMR Hydroengineering & Infrastructures is coming out with an initial public offering (IPO) of 996000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 21 per equity share.
  
• The issue will open for subscription on November 24, 2021 and will close on November 29, 2021.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 2.10 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Shreni Shares.
  
• Compliance Officer for the issue is Mayank.
  

Profile of the company

The company is engaged in the business of providing engineering consultancy and due diligence services to hydropower, dams, roads and railway tunnels. The services offered by the company include entire life cycle of projects covering design & engineering, due diligence & regulatory, bid management & construction engineering and quality & inspection. The company offers Hydro Engineering and Infrastructure services viz., Strategic Advisory, Due Diligence Studies, Project Viability Analysis, Cost Benefit Analysis, Risk Analysis, Regulatory Approvals, Monitoring and Evaluation, Geological Studies, Hydrological Studies, Hydraulic Studies, Hydraulic Design of Structures, Geotechnical Design of Surface and Underground Structures, Structural Design and Analysis, Dynamic Analysis, Numerical Analysis, Instrumentation Analysis, Detailed Design and Drawings, Bid level Designs and Drawings, Detailed Project Report, Feasibility Report, Layout Studies and Alternatives Analysis, Design Review, As Built Drawings, Bid documents, Bill of Quantities, Construction Planning and Scheduling, Construction Management and Method Statements, Design and Engineering Support During Construction, Rate Analysis and Cost Estimates, Contract Management, Procurement Management, Project Management, Project Commissioning, Completion Report, QA/QC plans, Quality Assurance at Site, Pre-Dispatch Inspection, Third Party Inspection, Safety Inspection and O & M stage Inspection.

Proceed is being used for:

• Funding working capital requirements.
  
• General corporate purposes.
  

Industry overview

The engineering sector is the largest of the industrial sectors in India. It accounts for 27% of the total factories in the industrial sectors and represents 63% of the overall foreign collaborations. India’s engineering sector has witnessed a remarkable growth over the last few years driven by increased investment in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to India’s economy. India, on its quest to become a global superpower, has made significant stride towards developing its engineering sector. The Government has appointed Engineering Export Promotion Council (EEPC) as the apex body in charge of promotion of engineering goods, products, and services from India. India export transport equipment, capital goods, other machinery/equipment, and light engineering products such as castings, forgings, and fasteners to various countries of the world. The Indian semiconductor industry offers a high growth potential area as industries which source semiconductors as inputs are themselves witnessing high demand.

100% FDI is allowed through the automatic route, with major international players looking for growth opportunities to enter the Indian engineering sector. The engineering sector in India attracts immense interest from foreign players as it enjoys a comparative advantage in terms of manufacturing cost, technology, and innovation. The above, coupled with favourable regulatory policies and growth in the manufacturing sector, has enabled several foreign players to invest in India. The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100% FDI. With the aim to boost the manufacturing sector, the Government has relaxed the excise duties on factory gate tax, capital goods, consumer durables and vehicles.

Pros and strengths

Geographical presence in both domestic and international markets: The company deals in Business to Business (B2B) category and caters to both domestic and international markets. Domestically, it has its presence across 11 states such as Uttar Pradesh, Himachal Pradesh, Delhi, Noida, Arunachal Pradesh, Uttarakhand, Telangana, Odisha, Maharashtra, Rajasthan, and Punjab. Internationally, it has executed assignments in around 5 countries including Nepal, Nigeria, Dubai, Germany and Senagal. For the financial year ending 2021, 2020 and 2019, its revenue from exports contributed 29.31%, 33.80% and 9.52% respectively of its revenue from operations.

Wide service portfolio: The company is engaged in the business of providing engineering consultancy and due diligence services to hydropower, dams, roads and railway tunnels. The services offered by the company include entire life cycle of projects covering design & engineering, due diligence & regulatory, bid management & construction engineering and quality & inspection.

Quality Certifications: The company is accredited with various certificates such as ISO 9001: 2015, ISO 14001: 2015 and ISO 45001: 2018 for providing consultancy services for hydro engineering and infrastructure sector. The company is the Corporate Member of several professional organisations such as consulting Engineers association of India (CEAI), Indian Society of Hydraulics and Indian Society of Rock Mechanics & Tunnelling technology. The company has achieved sustainability grade of Three Stars by 2021 ESG Risk AI Sustainability Grade.

Risks and concerns

Requires significant amounts of working capital:  The company intends to continue growing by expanding its business operations. This may result in increase in the quantum of its current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of fund, in a timely manner, or at all, to meet the requirement of working capital could adversely affect its financial condition and result of its operations.

Depend on skilled personnel: The company’s services are skilled and creative manpower intensive and it engages a considerable number of skilled personnel every year to sustain its growth. Further, it spends significant time and resources in training the manpower it hire. Its success is substantially dependent on its ability to recruit, train and retain skilled manpower. High attrition and competition for manpower may limit its ability to attract and retain the skilled manpower necessary for its future growth requirements. It cannot assure you that skilled manpower will continue to be available in sufficient numbers suitable to its requirements or that it will be able to grow its workforce in a manner consistent with its growth objectives, which may affect its business, financial condition, results of operations and prospects.

Face fair competition: The industry in which the company operates is fairly competitive and its results of operations and financial condition are sensitive to, and may be materially adversely affected by competitive pricing and other factors. Competition may result in pricing pressures, reduced profit margins, lost market share or a failure to grow its market share, any of which could substantially harm its business and results of operations. The domestic segment which it caters to is fragmented and fairly competitive. It competes primarily on the basis of quality of its services, customer satisfaction and marketing. Thus some of its competitors may have certain other advantages over it, including established track record, superior service offerings, larger portfolio of services, technology and greater market penetration, which may allow its competitors to better respond to market trends. They may also have the ability to spend more aggressively on marketing initiatives and may have more flexibility to respond to changing business and economic conditions than it does.

Outlook

DMR Hydroengineering & Infrastructures is engaged in providing engineering consultancy and due diligence services to hydropower, dams, roads, and railway tunnels. The services offered by the company include the entire life cycle of projects covering design & engineering, due diligence & regulatory, bid management & construction engineering, and quality & inspection. Other serving sectors of the company are renewables, water resources, mining, and urban infrastructure. Domestically, it has its presence across 11 states and internationally, it provides its services to over 5 countries including Nepal, Nigeria, Dubai, Germany and senegal. It has an experienced management team with significant experience in the engineering industry. On the concern side, expansion into new geographic regions, including different states in India, subjects the company to various challenges, including those relating to its lack of familiarity with the culture, legal regulations and economic conditions of these new regions, language barriers, difficulties in staffing and managing such operations, and the lack of brand recognition and reputation in such regions. Besides, it may require additional capital from time to time depending on its business needs.

The company is coming out with a maiden IPO of 996000 equity shares of Rs 10 each at a fixed price of Rs 21 per equity share to mobilize Rs 2.09 crore. On the performance front, the company’s total income for FY 2020-21 was on similar lines as of FY 2019-20 and has decreased insignificantly by 0.16% from Rs 244.84 lakh for FY 2019-20 to Rs 244.45 lakh for FY 2020-21. Profit after tax increased by 17.53% from Rs 51.55 lakh for FY 2019-20 to Rs 60.69 lakh for FY 2020-21. The company intends to continue to acquire large revenue clients and provide them with services which include entire life cycle of projects covering design & engineering, due diligence & regulatory, bid management, construction engineering, PMC services, quality and inspection. Besides, it intends to expand its services portfolio in Mechanical, Electrical, Automation, IT and Technology areas, in addition to the civil engineering services to the assignments which it is presently providing for infrastructure projects, it intends to expand its services portfolio in Mechanical, Electrical, Automation, IT and Technology areas.