Dinesh Engineers IPO kicks off; should you subscribe?

NEW DELHI: The Rs 185 crore initial public offering (IPO) of Dinesh Engineers kicked off on Wednesday.

The company intends to sell up to 1,00,00,000 equity shares in the price band of Rs 183-185 per share; proceeds of which will be used for expansion of business by setting up of further optical fibre cable (OFC) network. It will also use part of the proceeds to fund expenditures towards general corporate purposes.

At the higher end of the price band, the stock is being offered at 11.8 times FY18 earnings. The offer represents around 25.32 per cent of its post-issue paid-up equity shares of the company.


“Considering the positive outlook, strong financial performance and capacity expansion in the higher Ebitda margin segment, we feel the issue is attractively priced. However, considering the sustainability in profitability margins, current turbulence in equity market and listing in “T” category, we assign a ‘subscribe with caution’ rating to the issue,” said Choice Broking.

The company offers support services to telecom vendors that includes project management for laying of the duct and optic fibre cables, construction of basic transmission and telecom utilities, dark fiber leasing, optical fiber network construction and maintenance of the same.

Dinesh Engineers is approved by Department of Telecommunications (DoT) with the infrastructure provider (IP)-I license, under which it can establish and maintain wired networks, duct space for the purpose to grant on lease or sale on IRU basis to the licensees of telecom operators and ISPs.

The company has its own optical fibre cable network of around 7,500 km, which are leased to telecom operators.

Analysts noted that the company’s fiber leasing business is seeing higher demand and, thus, is observing improved capacity utilisation that increased to 32 per cent in FY18 from 20 per cent in FY15. Over FY15-18, revenue from this business increased by 45.8 per cent.

Choice Broking noted that since there is minimal operating cost involved in leasing the fiber, Ebitda margin for this business has remained as high as 85-90 per cent.