Denta Water and Infra IPO Day 2 Highlights: Issue booked 50.63x on second day. Check latest GMP, review

Denta Water IPO was booked 50.63 times at the end of the second day of bidding. The retail portion was booked 43.51 times, the NII portion 128.41 times and QIB portion 4.75 times.

Denta’s revenue increased from ₹119.6cr in FY22 to ₹238.6cr in FY24, achieving a CAGR of 41.3%, primarily driven by an increase in revenue from ongoing projects as well as the completion of pending orders during the year. The company’s EBITDA grew from ₹51.8cr in FY22 to ₹79.1cr in FY24, with a CAGR of 23.6%. PAT increased to ₹59.7cr, reflecting a CAGR of 24.8% over the same period.

• Established expertise in water management projects with a special focus on groundwater recharging.
• In-house expertise in designing and engineering of water management infrastructure projects.
• Strong order book and efficient business model.

The water treatment market in India is projected to grow at a CAGR of 6.20%, reaching USD 23.85 billion by 2033. With South India expected to dominate the market, Denta’s regional presence, particularly in Karnataka, positions it advantageously for capturing the expanding opportunities in water management. The company’s ongoing commitment to diversifying into other geographies such as Gujarat, Maharashtra, Madhya Pradesh, and Uttar Pradesh further strengthens its growth prospects.

As of November 30, 2024, Denta has secured a robust order book totaling ₹11,004.36 million, with ₹10,667.52 million attributed to water management projects, offering strong visibility into future revenues. The company has already completed ₹3,479.85 million worth of projects, leaving an outstanding order book of ₹7,524.51 million, expected to be executed within the next 24 to 36 months. This timeline for project completion aligns well with the projected growth in water and infrastructure projects driven by government initiatives, including substantial allocations for the Railways and water reuse projects.

With the Indian construction market growing rapidly at a CAGR of 17.26%, Denta’s strategic positioning in key infrastructure segments and its ability to execute large-scale water management projects provides an attractive investment opportunity. The strategic focus on high-growth regions and evolving technologies ensures that the company remains at the forefront of the water treatment industry amongst peers.

We recommend subscribing to the issue, as with a robust order book, strong execution capabilities, and an expanding TAM, Denta is well-positioned to deliver sustained growth amongst peers.

Denta Water and Infra IPO Live: Denta Water and Infra IPO was booked 38.98 times on the second day of the bidding process on Thursday. The retail investor portion was subscribed 39.48 times, NII portion 109.54 times and QIB portion 4.41 times.

In India, the total installed capacity to treat wastewater (domestic sewage) from urban areas is 44%, or 31,841 MLD, compared to an estimated daily sewage output of 72,368 MLD. The actual treatment rate is only 28%, or 20,236 MLD. Even in Class I (populations over 100,000) and Class II (populations 50,000-100,000) towns, which account for 72% of the urban population, only 30% of the wastewater gets treated—i.e., 11,787 MLD vs. the 38,254 MLD generated.

According to a recent CPCB report (March 2021), India's present water treatment capacity is 27.3%, and its sewage treatment capacity is 18.6%, with an additional 5.2% capacity currently being built.

While the majority of Denta Water’s projects are undertaken on a sub-contract basis, the company also forms project-specific unincorporated joint ventures for certain projects. Notable projects undertaken through joint ventures include the Byrapura & Hiremagaluru LIS Project, the KC Valley Phase-2 Project, and the BLR East LIS Project. The company enters into consortium arrangements with other infrastructure and construction entities based on specific eligibility requirements, such as experience and financial resources.

As of November 30, 2024, Denta Water & Infra Solutions Ltd. has completed 32 projects related to water management infrastructure development. The company currently has 17 ongoing projects, with a total contract value of ₹11,004.36 million. Of this, ₹10,667.52 million is allocated to water management projects, while ₹336.84 million pertains to infrastructure projects, including railway and roadway developments (roads and bridges construction).

Out of the total contract value, ₹3,479.85 million worth of work has been completed, and the outstanding order book stands at ₹7,524.51 million. For the purposes of the Red Herring Prospectus (RHP), the 'Order Book' refers to the contract value of projects where the company has entered into direct contracts and sub-contracts, minus the revenue already recognized.

Denta Water and Infra IPO was subscribed 33.02 times so far on second day of the public offer. The retail portion was subscribed 32.16 times, NII portion 73.65 times and QIB portion 4.05 times.

• Manish Shetty is the Managing Director of the Company. Prior to joining the Company, he was working as the head at Shri J N Shetty, Class-I Contractors (Firm).
• Sujith T R is the Whole-time Director and Chief Financial Officer of the Company. In the past, he was associated with Johnson & Johnson Private Limited. He has been associated with the Company since its incorporation.
• Nista U Shetty is the non-executive director of the Company. She has experience in the field of wellness and hospitality.
• Gopalakrishna Kumaraswamy is the Independent Director of the Company. He is an Indian Army veteran and has experience in military services.
• R. Narendra Babu is the Independent Director of the Company. He has experience in the field of construction, groundwater recharging, lift irrigation, and water management. Prior to joining the Company, he was working as Executive Engineer at the Minor Irrigation Division, Government of Karnataka.
• Pradeep N is the Independent Director of the Company. He is also an associate member of the Institute of Chartered Accountants of India and is a practising chartered accountant.
• Sujata Gaonkar is the Company Secretary and Compliance Officer of the Company. Prior to joining the Company, she was working as associate company secretary at M/s. N K Hebbar & Associates and as whole-time company secretary with Liwayway Foods India Pvt. Ltd.

Denta Water & Infra Solutions Ltd. (DWISL) has emerged as one of the key players in the field of water engineering, procurement, and construction (“EPC”) services. With a meritorious track record in infrastructure project installations, including groundwater recharging through recycled water, Denta Water has been a contributor to addressing the rising demand for water-related solutions in the country.

Their notable achievements encompass pivotal projects like the Byrapura and Hiremagaluru LIS Project, Karagada LIS Project, and others, primarily executed through lift irrigation systems. Notably, Denta Water played a substantial role in the first phase of the KC Valley project, contributing to Bengaluru's reputation as the second-largest city globally in terms of treated wastewater quantity.

Denta Water and Infra Solutions Ltd's order book stood at ₹7,524.5 million (~3.2x of FY24 revenue), demonstrating business visibility over the medium term. The IPO proceeds of ₹1,500 million (~68% of proceeds) will be utilized for working capital purposes. The company has strong expertise in groundwater recharge projects and is focused on the infrastructure development space, with plans for expansion into other geographies for the reuse of discharge water.

At the upper band of ₹294, the issue is valued at an EV/EBITDA of 9.1x based on FY24 EBITDA and a P/E of 13.14x, based on FY24 EPS of ₹22.37. We assign a “Subscribe for Long Term” rating for this issue.

Denta Water and Infra IPO was booked 26.10 times so far on second day of the book-building process on Thursday. QIB portion was booked 1.73 times, NII portion 57.43 times and retail portion 26.59 times.

The promoters of Denta Water & Infra Solutions Ltd are Sowbhagyamma, Sujith T R, C Mruthyunjaya Swamy, and Hema H M. As of the date of the Red Herring Prospectus, the promoters collectively hold 18,436,000 equity shares with a face value of ₹10 each, representing 96.02% of the company’s issued, subscribed, and paid-up equity share capital. All equity shares issued to the promoters were fully paid up at the time of allotment.

Denta Water & Infra Solutions Ltd’s IPO is a book-built issue of ₹220.5 crore. The issue consists entirely of a fresh issue of 0.75 crore shares, aggregating to ₹220.5 crore.

Issue Structure

- QIB: Not more than 50% of the Net Issue

- NII (HNI): Not less than 15% of the Net Issue

- Retail: Not less than 35% of the Net Issue

Investors can apply for the Denta Water and Infra IPO as the bidding for the 2nd day of subscription kicked off today. Investors can place their bids till 5 pm today.

The IPO consists of a fresh issue of ₹220.5 crore. The proceeds from this fresh issuance will be utilised for (i) meeting the working capital requirements of the company ( ₹150 crore), and (ii) general corporate purposes, subject to applicable laws.

“At the upper price band of ₹294, Denta is available at a P/E of 16.2 (FY25 Annualised), which is at a discount compared to its listed peers. The company’s focus on water management projects and growing market opportunities present significant prospects for the company's future growth. With a robust order pipeline and consistent financial performance featuring industry-leading margins, the company is set for future success. We recommend subscribing to this issue for short- to medium-term investment,” said brokerage Geojit Financial.

The company’s significant involvement in the "Jal Jeevan Mission" of the Government of India reflects its commitment to critical water management initiatives. Furthermore, Denta secured contracts for lift irrigation projects in various regions, such as Makali, Makali Hosahalli, Krishnapura, Karnataka, and neighbouring villages in the Channapatna Taluk of Ramanagar District, Karnataka. Denta’s growth is inherently linked to the nation's infrastructure development, with a focus on design and engineering consultancy that aligns with ongoing and anticipated projects in the Karnataka Government's water management sector.

Denta Water IPO GMP today or Denta Water IPO grey market premium is +150. This indicates Denta Water share price was trading at a premium of ₹150 in the grey market, according to investorgain.com.

Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of Denta Water share price was indicated at ₹444 apiece, which is 51.02% higher than the IPO price of ₹294.

Today's IPO GMP is positive and anticipates a solid listing based on the grey market activity over the last 7 sessions. Experts from investorgain.com say that the lowest GMP is ₹45 and the highest is ₹165.

'Grey market premium' indicates investors' readiness to pay more than the issue price.

Denta Water and Infra IPO Live: At the upper price band, the company is valuing at P/E of 13.14x, with an EV/EBITDA of 9.13x and market cap of ₹7,849 million post issue of equity shares and return on net worth of 36.36%. We believe that the IPO is fairly priced and recommend a “Subscribe-Long term” rating to the IPO, said Anand Rathi.

Denta Water and Infra IPO Live: Denta Water and Infra IPO has entered the second day of its subscription period today, January 23. The bidding period for the IPO commenced on January 22 and will conclude on January 24. Today is the second day of Denta Water and Infra IPO.

Denta Water and Infra IPO Day 1 Live Updates: As of January 22, the grey market premium (GMP) of the Denta Water and Infra public issue was at ₹150 per share. 

With the upper price band of the public issue at ₹294, the shares are expected to be listed at ₹444, a premium of 51.02 per cent, according to Investorgain data. GMP is an indicator of investors' willingness to pay more for a public issue. 

The GMP dropped to ₹150 on January 22 from its previous level of ₹165 after the first day of bidding. 

Denta Water and Infra IPO Day 1 Live Updates: The public issue was booked 17.07x on the first day of bidding as investors subscribed for 8,96,36,900 shares, compared to the 52,50,000 shares on offer. 

Denta's strategic positioning in key infrastructure segments and its ability to execute large-scale water management projects provides an attractive investment opportunity. The strategic focus on high-growth regions and evolving technologies ensures that the company remains at the forefront of the water treatment industry amongst peers. We recommend subscribe to the issue as with a robust order book, strong execution capabilities, and an expanding TAM, Denta is well-positioned to deliver sustained growth amongst peers.

The IPO consists of fresh issue of ₹220.5cr. The proceeds from its fresh issuance will be utilised for (i) meeting working capital requirements of the Company ( ₹150 cr), (ii) General corporate purposes

The company’s in-house design and engineering team has necessary skills and expertise in designing capabilities for geographical complexities and critical aspects of the projects such as identification of potential ground water recharging sites, hydraulic flow calculations, drainage laying design, process flow diagram, hydraulic flow diagram, and water balance. 

This diverse capability enables them to offer tailor-made solutions of each and every client. It also enables them to correctly bid with project specifications and deliver projects in accordance with the requirements of clients.

The initial public offer of Denta Water IPO has been subscribed 14.15x on the first day of subscription today, at 15:33 IST, as per BSE data.

The initial share sale received bid for 7,42,78,600 shares against 52,50,000 shares on offer, according to BSE.

The portion for retail investors received 15.40x subscription while the quota for non-institutional investors got subscribed 27.91x. The qualified institutional buyers (QIBs) part is booked 1.63x.

The value of the Indian water and wastewater treatment market is projected to increase at a compound annual growth rate (CAGR) of 6.20%, from USD 13,101.158 million in 2023 to USD 23,849.806 million in 2033. Marketysers Global Report, RHP, is the source. Half of India's rural population depends on ground water (GW) for basic necessities, making it the country's greatest user. The yearly recharge from 447 billion cubic meters to 432 billion cubic meters is thought to have decreased as a result of overexploitation of 17% of ground water blocks caused by excessive GW extraction.

Overall, Denta Water’s strategic focus on water management projects, growing market opportunities, and strong order book positions it well for future growth in water management and infrastructure sectors. Considering its valuation with a PE ratio of 9.5x based on FY24 earnings, we recommend a “SUBSCRIBE” rating for medium to long term investment.

• Joint ventures: The company is required to enter joint ventures to bid for some of the projects (especially larger size). Failure on the part of partner might lead to cost escalation, and assuming of complete responsibility of the project.
• Revenue from Top 1 customer: In FY24, the company derived 32.0% of its revenue from the top customer. Failure to retain the customers and/or execute orders in favorable conditions could result in financial loses.

Incorporated in 2016, Denta Water and Infra Solutions Limited is a growing water and infrastructure solutions company engaged in designing, installing, and commissioning water management infrastructure projects with expertise in groundwater recharge projects. The company has experience in water engineering and EPC services, the company specializes in infrastructure projects, including groundwater recharging through recycled water, addressing growing water solution demands.

The initial public offer of Denta Water IPO has been subscribed 8.94x on the first day of subscription today, at 13:21 IST, as per BSE data.

The initial share sale received bid for 4,69,31,450 shares against 52,50,000 shares on offer, according to BSE.

The portion for retail investors received 10.35x subscription while the quota for non-institutional investors got subscribed 15.49x. The qualified institutional buyers (QIBs) part is booked 1.56x.

• Established expertise in water management projects
• In-house expertise in designing and engineering of water management infrastructure projects
• Strong Order Book

The company is focused on infrastructure development space and expansion into other geographies for reuse of discharge water. At the upper band of INR 294, the issue is valued at an EV/EBITDA of 9.1x based on FY24 EBITDA and P/E of 13.14x, based on FY24 EPS of INR 22.37. We assign a “Subscribe for Long Term” rating for this issue.

• Established expertise in water management projects with special focus on ground water recharging.
• In-house expertise in designing and engineering of water management infrastructure projects.
• Strong order book and efficient business model.

The initial public offer of Denta Water IPO has been subscribed 5.62x on the first day of subscription today, at 11:48 IST, as per BSE data.

The initial share sale received bid for 2,94,95,800 shares against 52,50,000 shares on offer, according to BSE.

The portion for retail investors received 6.49x subscription while the quota for non-institutional investors got subscribed 9.02x. The qualified institutional buyers (QIBs) part is booked 1.55x.

• High dependence on govt. projects: Contribution to revenue from government projects has increased from 23.8% in FY22 to 63.4% in FY24. This increasing dependence, particularly on Government of Karnataka could affect revenues from operations if there are any changes in policies, budgetary allocation, change in the government or unfavorable terms and conditions.
• KMP attrition: The company is witnessing high Key Managerial Person attrition. Two CFOs and one director resigned in last one year. Failure to retain KMP including directors could result in decreasing efficiency. Furthermore, the company might be required to increase compensation to the employees thereby straining the financials.

As on November 30, 2024, 17 projects are ongoing, and the order book value stands at ₹7,524.51mn. The unexecuted orders offer revenue visibility of over 2 years. In general, the average execution period for Ground Water Recharge (GWR) projects varies from 24-36 months. The company is currently focusing on the state of Karnataka and accordingly all its projects are concentrated in Karnataka. The company’s proven execution capabilities in executing GWR projects is expected to lead to new order wins and growth.

The company has embraced an asset-light business model while acquiring critical equipment necessary for the construction activities of the projects it undertakes. The emphasis is on development management and entering into joint development agreements or joint ventures, which necessitates a lower initial capital investment compared to a direct approach. This asset-light model enables them to maintain low capital requirements, thereby helping to decrease equipment maintenance costs. Typically, they delegate a portion of the work to subcontractors who supply both manpower and equipment support.

In India, Water and Wastewater Treatment market is expected to grow at a CAGR of 6.2% by 2033 led by CAGR of 6.24% in southern India. The company derives over 87% of its revenue from water management while rest are derived from irrigation, Roads and Miscellaneous segment. Its asset light model for purchase of equipment helps it sustain healthy asset turnover and maintain decent profitability.

Company attracts a healthy EBITDA margin of 33-43% which is one of the highest in the industry. As is the case with EPC companies, second half of financial year are strong for these companies. We thereby assign “Subscribe” rating to the IPO.

The initial public offer of Denta Water IPO has been subscribed 52% on the first day of subscription today, at 10:12 IST, as per BSE data.

The initial share sale received bid for 27,05,050 shares against 52,50,000 shares on offer, according to BSE.

The portion for retail investors received 68% subscription while the quota for non-institutional investors got subscribed 83%. The qualified institutional buyers (QIBs) part is yet to be booked.

The Promoters of the company are Sowbhagyamma, Sujith T R, C Mruthyunjaya Swamy and Hema H M.

• Leverage core competencies in execution of water management projects.
• Expansion into other geographies for reuse of discharge water.

At the upper price band of ₹294, Denta is available at a P/E of 16.2 (FY25 Annualised), which is at a discount compared to its listed peers. The company’s focus on water management projects and growing market opportunities present significant prospects for the company's future growth. With a robust order pipeline and consistent financial performance featuring industry-leading margins, the company is set for future success. We recommend subscribing to this issue for short- to medium term investment.

Denta Water has an order book valued at ₹784.2cr as of the end of 2024. With a 3.2x order book to sales ratio for FY24, there will be a solid medium-term revenue visibility. In FY24, Denta's ROE and EBITDA margin were both higher than those of its competitors, at 36.3% and 33%, respectively. In FY24, the debt-to-equity ratio was 0.01x, indicating sound financial standing.

Denta Water and Infra Solutions Ltd secured slightly more than ₹66 crore from anchor investors prior to its initial public offering (IPO). Among the participants in the anchor round were both foreign and domestic institutions, including Abakkus Diversified Alpha Fund-2, Rajasthan Global Securities, Saint Capital Fund, Finavenue Capital Trust, Chhatisgarh Investments Ltd, Steptrade Revolution Fund, Astorne Capital VCC -- Arven, and Aarth AIF, as indicated in a circular posted on the BSE's website. 

According to the circular, the company allocated 22.5 lakh equity shares at a price of ₹294 each to 10 funds, resulting in a total transaction value of ₹66.15 crore.

Denta Water IPO GMP today or Denta Water IPO grey market premium is +165. This indicates Denta Water share price was trading at a premium of ₹165 in the grey market, according to investorgain.com.

Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of Denta Water share price was indicated at ₹459 apiece, which is 56.12% higher than the IPO price of ₹294.

Today's IPO GMP is positive and anticipates a solid listing based on the grey market activity over the last six sessions. Experts from investorgain.com say that the lowest GMP is ₹45 and the highest is ₹165.

'Grey market premium' indicates investors' readiness to pay more than the issue price.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.