Denta Water and Infra Solutions IPO

Founded in 2016, Denta Water and Infra Solutions Limited specializes in water and infrastructure solutions, focusing on the design, installation, and commissioning of water management systems, with particular expertise in groundwater recharge projects. The company also handles railway and highway construction projects.

Denta Water has successfully completed significant projects, such as the Byrapura and Hiremagaluru LIS Project, the Karagada LIS Project, and the first phase of the KC Valley wastewater treatment project in Bengaluru. They have also contributed to the government’s Jal Jeevan Mission. The company secures contracts through a transparent bidding process with both State and Central Governments and undertakes sub-contracts from private parties. Denta Water participates in tenders for groundwater recharge, lift irrigation, and drinking water infrastructure projects under initiatives like Jal Jeevan Mission.

With the Indian water and wastewater treatment market expected to grow at a CAGR of 6.08% from FY 2023 to FY 2030, Denta Water is poised for further growth.

Peer Comparison

• Va Tech Wabug
• EMS Limited

More About Denta Water and Infra Solutions Limited

Founded in 2016, Denta Water and Infra Solutions Limited has become a prominent player in water engineering, procurement, and construction (EPC) services. The company has significantly contributed to addressing the growing demand for water-related solutions, particularly in groundwater recharging and recycled water projects.

Key Projects and Achievements

Denta Water has executed several important projects, including the Byrapura and Hiremagaluru LIS Project, the Karagada LIS Project, and the first phase of the KC Valley project, which contributed to Bengaluru’s reputation for treated wastewater. Their involvement in India’s Jal Jeevan Mission further demonstrates their commitment to water management initiatives. The company has also undertaken lift irrigation projects in Karnataka’s drought-prone regions, enhancing water supply and groundwater recharging.

Focus on Groundwater Recharging

As the largest user of groundwater in India, with over-extraction threatening its sustainability, Denta Water focuses on long-term water management strategies, including artificial groundwater recharge (GWR). Their projects involve using treated wastewater to improve groundwater levels, particularly in areas facing water scarcity. They have played a pivotal role in Karnataka’s large-scale groundwater recharging initiatives, such as the recycling of 440 MLD of secondary treated wastewater to replenish aquifers.

Current and Ongoing Projects

As of October 31, 2023, Denta Water has completed 27 water management projects and is working on 22 ongoing projects. These include water supply, sanitation, lift irrigation, and groundwater recharging infrastructure, with a total contract value of ₹9,842.26 million. Their projects cover several districts in Karnataka, including Kolar, Chikkaballapura, and Ramanagara.

Engineering and Expertise

Denta Water boasts a skilled team of engineers and industry experts. Their services span from project conceptualisation to commissioning, with a strong emphasis on design, engineering, construction, and operations. The company is also involved in the maintenance of completed projects, ensuring long-term water management solutions.

• Government Initiatives on Water Conservation:

• The Government of India has implemented various initiatives focused on water conservation and restoration.

• Significant improvement in river water quality, with contaminated river lengths reduced from 351 in 2018 to 311 in 2022.

• Water quality improved in 180 of the 351 contaminated rivers in 2018.

• Research from the Ministry of Jal Shakti indicates a drop in the percentage of contaminated rivers from 70% in 2015 to 46% in 2022.

• Safe drinking water remains a priority, particularly in rural areas, with regular water resources assessments by the Central Water Commission (CWC).

• Business Opportunities:

• Focus on water reuse and recycling projects presents opportunities for expanding involvement in the sector.

• Current ongoing projects span water, power, and infrastructure sectors, including the design, construction, and maintenance of water distribution systems and treatment plants.

Business Operations

The company’s operations are primarily driven by two types of contracts: Direct Contracts and Tender-Based Contracts.

Direct Contracts

These contracts are procured directly from various departments of the State Government of Karnataka. They typically involve small infrastructure projects, such as water-retaining structures and riverbed developments, with contract values under 50 lakhs. In the three months ending June 2023, the company successfully completed three such contracts.

Tender-Based Contracts

The company participates in competitive bidding for tenders issued by government departments, particularly in the fields of water management and infrastructure development. The tender department regularly monitors e-procurement portals and national newspapers to identify potential projects. The pre-bidding stage includes a thorough evaluation of project viability, considering factors such as location, complexity, cost, and potential profitability. If the company does not meet specific eligibility criteria, it may enter into joint ventures. Once the technical bid is pre-qualified, financial bids are reviewed.

Project Execution

Once a contract is awarded, the company mobilizes resources and materials to commence the project. It works closely with government authorities to prepare detailed plans, estimates, and schedules. The execution phase involves construction, testing, commissioning, and, where necessary, operation and maintenance during the defect liability period.

The company’s in-house design and engineering team plays a critical role in delivering structural and architectural designs for the projects, ensuring all work adheres to government specifications.

Industry Outlook

India’s Current Key Practices in Water and Wastewater Management

India, with 16% of the global population but only 4% of the world’s water resources, is facing growing challenges in managing its water resources. The rapid population growth and urbanization are exerting immense pressure on the country’s water supply and wastewater management systems.

Water Demand and Availability

• Current Water Demand: India’s water demand is expected to increase from 710 BCM (2010) to 1180 BCM by 2050.

• Geographical Resources: Major rivers like the Ganga, Yamuna, and Cauvery support water needs in different regions.

• Monsoon Dependency: 80-95% of India’s annual water supply comes during the monsoon, creating seasonal stress on water resources.

Water Usage Trends

• Agriculture: Water use in agriculture, which once accounted for 83.3%, is expected to drop to 72.5% by 2025.

• Industrial Shift: Industries, including textiles and chemicals, now use a significant share of water, contributing to pollution.

Wastewater and Pollution

• Wastewater Generation: Urban wastewater generation reached 72,368 MLD in 2020, with only 28% being treated.

• Pollution Impact: Industrial waste, along with untreated sewage, severely impacts water quality, contributing to waterborne diseases affecting millions.

Reuse and Recycling Practices

• Wastewater Treatment: Many cities have wastewater treatment plants to recycle water for non-potable uses like irrigation.

• Industrial Reuse: Industries are adopting technologies to treat and reuse wastewater, promoting sustainability.

Future Outlook

• Water Stress: By 2030, India may face severe water scarcity, affecting both public health and economic productivity.

• Government Initiatives: The Indian government is prioritizing water conservation, expanding treatment capacity, and improving water quality to address these challenges.

Opportunities in Sewage Treatment

• Addressing Sewage Treatment Gap:Urbanization and rising sewage creation highlight the urgent need to close the existing treatment gap. The current infrastructure operates at only 75% capacity, necessitating strengthening the sewerage conveyance system.

• Improvement in Compliance:Only 23% of treatment capacity meets the required standards. Focusing on the operation and maintenance (O&M) of sewage treatment plants (STPs) is essential to meet quality standards.

• Use of Treated Sewage:There is potential to use treated sewage for non-potable applications such as horticulture, irrigation, firefighting, industrial cooling, and toilet flushing, reducing the demand for fresh water.

• Sewage for Industrial Use:Treated sewage can be supplied to industrial clusters for further treatment and use, aiding in meeting industry-specific requirements.

Market Drivers’ Analysis

• Increasing Demand for Chemically Treated Water:Water plays a critical role in industrial production, with sectors like food and beverage, textiles, and pharmaceuticals driving the demand for chemically treated water.

• Real-Time Water Monitoring:The adoption of real-time monitoring tools in industries can help manage water quality, ensuring operational efficiency and safety.

• Stringent Regulatory Measures:With the rise in global water consumption and wastewater discharge, governments are implementing stricter water quality regulations, leading to a surge in demand for water treatment solutions.

• Industrial Wastewater Treatment:Growing industrial water consumption and wastewater discharge call for advanced treatment techniques, especially in sectors like power generation, petrochemicals, and food production.

• Environmental Impact Awareness:Increased consumer awareness about water conservation and the environmental impact of wastewater discharge is fueling the demand for effective water treatment and recycling solutions.

Market Opportunities in Water Reuse and Sustainability

• Sustainable Approaches

Adopting 3R principles—Reduce, Recycle, Reuse—can substantially improve water resource management by reducing conflicts in water allocation and increasing availability. Reusing buffered water allows industries and farmers to avoid over-extraction while ensuring a continuous supply.

• Key Industry Benefits

• Water Security: Water reuse improves access to clean water for industries and communities.

• Economic Growth: Ensures water availability for farming and industrial expansion, creating job opportunities.

• Environmental Impact: Reduces untreated water discharge, minimizing pollution.

• Government and Private Sector Initiatives

• India’s Growing Efforts: Government projects like Swachh Bharat and Namami Gange focus on enhancing water infrastructure and promoting sustainable practices.

• Technology Integration: Advances like membrane filtration and reverse osmosis improve efficiency and water quality.

• Public-Private Partnerships (PPP)

Private sector participation in water management is critical for overcoming financial and sustainability challenges, especially with India’s rapidly growing urban population and infrastructure needs.

How Will Denta Water and Infra Solutions Limited Benefit?

• Addressing Water Management Challenges

Denta Water’s expertise in groundwater recharging and wastewater treatment will directly contribute to mitigating India’s looming water scarcity. By focusing on sustainable water management, the company will play a pivotal role in addressing the growing demand for water resources, particularly in drought-prone regions like Karnataka.

• Contribution to Sewage Treatment

With increasing urbanization, Denta Water’s involvement in enhancing sewage treatment capacity is crucial. Their focus on expanding the current treatment infrastructure aligns with India’s need to close the sewage treatment gap, ensuring better quality water for agricultural, industrial, and public uses.

• Groundwater Recharge Projects

Denta Water’s commitment to artificial groundwater recharge initiatives, particularly in Karnataka, will help replenish depleting aquifers. Through the recycling of treated wastewater, the company contributes to long-term water sustainability, making a significant impact on regions heavily reliant on groundwater for drinking and irrigation.

• Involvement in Government Initiatives

Denta Water’s engagement with government-led initiatives such as the Jal Jeevan Mission demonstrates its alignment with national water conservation goals. By participating in large-scale projects focused on improving water infrastructure, the company enhances its role in the nation’s water management efforts.

• Technological Integration for Sustainability

By adopting advanced technologies like membrane filtration and reverse osmosis, Denta Water enhances water quality and treatment efficiency. These technologies will help meet the growing demand for clean water and support industrial and agricultural sectors by offering reliable, sustainable water solutions.

• Business Expansion in Water and Wastewater Treatment

As the demand for water and wastewater treatment solutions grows, Denta Water is positioned to capitalize on this opportunity. With a focus on expanding in South India, the company is well-placed to serve industries and communities needing innovative and scalable water management solutions.

• Rising Demand for Chemically Treated Water

Denta Water is strategically positioned to benefit from the growing demand for chemically treated water, especially in industries like food processing, textiles, and pharmaceuticals. By providing tailored treatment solutions, the company meets the industrial need for high-quality water in production processes.

• Expanding in the Infrastructure Sector

Denta Water’s ability to diversify into infrastructure projects related to water treatment plants and distribution systems offers significant growth opportunities. As the construction sector expands, the company’s involvement in building and maintaining essential water infrastructure ensures continued demand for its services.

• Private Sector Collaboration

Denta Water’s active participation in public-private partnerships (PPPs) is vital for overcoming financial and sustainability challenges. By collaborating with both governmental and private entities, the company strengthens its role in India’s water management industry and expands its influence in large-scale infrastructure projects.

• Capitalizing on Regulatory Demands

As regulatory frameworks for water treatment become more stringent, Denta Water’s focus on compliance ensures it meets new industry standards. This positions the company to offer services that help industries comply with growing environmental regulations, contributing to the reduction of water pollution and enhancing water quality.

Denta Water and Infra Solutions Limited IPO Overview

Denta Water and Infra Solutions has submitted draft papers to SEBI for an IPO to raise funds. The offering includes a fresh issue of 75 lakh equity shares with no offer-for-sale component. The company may also explore issuing 11 lakh shares via private placement, rights issue, or preferential issue before filing the red herring prospectus. Any funds raised through pre-IPO placements will proportionally reduce the size of the fresh issue.

Why is Denta Water and Infra Solutions IPO Going Public?

Denta Water and Infra Solutions Limited has announced plans to go public, aiming to leverage raised funds for expansion, financial growth, and strategic opportunities in the water infrastructure sector.

• Expansion of Operations: The IPO will support the company’s growth, enhancing its capacity to undertake larger water EPC projects and strengthen its position in the industry.

• Utilization of Funds: Proceeds will address working capital needs, ensuring smooth project execution and supporting general corporate purposes for sustainable growth.

• Strategic Growth: Going public provides access to additional financial resources, fostering innovation, scalability, and increased market presence in the competitive water infrastructure industry

Denta Water and Infra Solutions Limited Upcoming IPO Details

Category	Details
Issue Type	Book Built Issue IPO
Total Issue Size	Fresh Issue: 75,00,000 shares (aggregating to ₹220.50 crore)
Offer for Sale: NA
IPO Dates	Mentioned below
Price Bands	₹279 – ₹294
Lot Size	50 shares
Face Value	₹10 per share
Listing Exchange	BSE, NSE
Shareholding pre-issue	1,92,00,000 shares
Shareholding post -issue	2,67,00,000 shares

Denta Water and Infra Solutions IPO Important Dates

IPO Activity	Date
IPO Open Date	22 January 2025
IPO Close Date	24 January 2025
Basis of Allotment Date	27 January 2025
Refunds Initiation	28 January 2025
Credit of Shares to Demat	28 January 2025
IPO Listing Date	29 January 2025

Denta Water and Infra Solutions IPO Lots

Application	Lots	Shares	Amount
Retail (Min)	1	50	₹14,700
Retail (Max)	13	650	₹1,91, 100
S-HNI (Min)	14	700	₹2,05,800
S-HNI (Max)	68	3,400	₹9,99,600
B-HNI (Min)	69	3,450	₹10,14,300

Denta Water and Infra Solutions IPO Lead Managers

Lead Managers

SMC Capitals Limited

Denta Water and Infra Solutions Limited IPO Valuation Overview

KPI	Value
Earnings Per Share (EPS)	26.10
Price/Earnings (P/E) Ratio	TBD
Return on Net Worth (RoNW)	47.93%
Net Asset Value (NAV)	54.45
Return on Equity	47.93%
Return on Capital Employed (ROCE)	95.98%
EBITDA Margin	38.41%
PAT Margin	28.75%
Debt to Equity Ratio

Denta Water and Infra Solutions IPO Peer Group Comparison

Company Name	Face Value per Equity Share (₹)	Revenue (₹ in Million)	Basic EPS for 2023 (₹)	NAV (₹)	P/E	RoNW for 2023 (%)
Our Company	10	1,743.24	26.10	54.45	[●]	47.93%
VA Tech Wabag	2	29,604.80	35.01	253.24	17.93	0.69%
EMS Limited	10	4,842.48	21.95	103.80	20.82	23.84%

Key Insight

• Revenue: VA Tech Wabag leads in revenue generation with ₹29,604.80 million, reflecting a robust operational scale. EMS Limited follows with ₹4,842.48 million, while Our Company lags at ₹1,743.24 million, indicating its smaller market presence compared to the listed peers.

• Earnings Per Share (EPS): Our Company showcases a Basic EPS of ₹26.10, higher than EMS Limited’s ₹21.95 but below VA Tech Wabag’s ₹35.01. This positions VA Tech Wabag as the most profitable company per share, highlighting its ability to generate higher earnings for its shareholders.

• Net Asset Value (NAV): VA Tech Wabag has a significant NAV of ₹253.24, reflecting substantial shareholder equity. EMS Limited ranks second with ₹103.80, while Our Company’s ₹54.45 indicates a smaller asset base or retained earnings, showing room for growth in shareholder wealth.

• Price-to-Earnings (P/E) Ratio: The P/E ratios for VA Tech Wabag and EMS Limited stand at 17.93 and 20.82, respectively, showcasing fair market valuations. However, the P/E ratio for Our Company is unavailable, leaving its market valuation relative to earnings unclear for investors.

• Return on Net Worth (RoNW): Our Company excels with an impressive RoNW of 47.93%, indicating exceptional profitability against its equity. EMS Limited shows a moderate 23.84%, while VA Tech Wabag’s 0.69% suggests limited returns, emphasizing differing efficiency levels in generating shareholder value across companies.

Denta Water and Infra Solutions Limited IPO Strengths

• Expertise in Water Management Projects

The company has demonstrated expertise in water management, specialising in groundwater recharge and lift irrigation. With a history of 27 completed projects for the Government of Karnataka, they excel in implementing solutions like tank filling and check dams. Their technical prowess enables them to secure high-value direct contracts and subcontracts, maintaining a strong focus on water conservation and resource management.

• In-House Design and Engineering Capabilities

Their in-house team showcases exceptional proficiency in designing and engineering water infrastructure projects. Employing advanced technologies such as GIS, soil testing, and structural analysis, they deliver tailored solutions for groundwater recharge. The asset-light model allows strategic outsourcing, while critical processes like design and quality control remain in-house, ensuring project-specific customisation and high-quality execution.

• Strong Management Team

The leadership, guided by an experienced promoter with over 38 years in civil engineering, drives the company’s vision. The management team combines expertise in water conservation, irrigation, and rural development with innovative project execution. This collective capability strengthens operations, fosters client trust, and positions the company as a competitive player in water infrastructure.

• Robust Order Book

As of October 31, 2023, their order book reflects ₹9,842.26 million, predominantly in water management projects. The successful completion of ₹2,112.89 million worth of work showcases their execution capabilities. With ongoing projects across Karnataka, they maintain steady revenue visibility while strategically managing resources to sustain growth and deliver within prescribed timelines.

• Proven Track Record of Timely Execution

The company has consistently delivered complex projects on schedule, ensuring high-quality construction and operational efficiency. Their design and engineering teams minimise delays, leveraging planning and supervision expertise. Recognised for timely project completion, they have built credibility in the industry, enabling them to secure new contracts and expand their client base.

• Efficient Business Model

Their asset-light business model balances strategic outsourcing with in-house expertise in design, quality control, and supervision. By focusing on efficiency, they effectively manage working capital, equipment, and resources. This streamlined approach allows them to scale operations while maintaining high standards of quality and adapting to the dynamic needs of water management projects.

Objectives of the IPO Proceeds

The Net Proceeds are intended to be utilised as per the details provided in the table below:

Particulars	Amount (in ₹ million)
Funding the working capital requirements	1500
General corporate purposes*	[●]

Note: *To be determined upon finalisation of the Offer Price and updated in the Prospectus prior to filing with the RoC

Denta Water and Infra Solutions Limited (in millions)

Particulars	30 June 2023	31 Mar 2023	31 Mar 2022	31 Mar 2021
Assets	1323.24	1232.76	606.37	422.34
Revenue	322.52	1757.47	1196.35	320.71
Profit After Tax	81.18	501.12	383.37	111.02
Reserves and Surplus	1078.63	997.47	496.31	112.93
Total Borrowings	10.81	11.52	–	0.47
Total Liabilities	195.95	186.65	62.06	261.41

Key Insights from Financial Performance

• Assets: The company’s assets have steadily grown, from ₹422.34 crores in 2021 to ₹1323.24 crores by June 2023. This indicates robust expansion through capital investments or improved asset utilization, reflecting the company’s focus on strengthening its financial base and operational capabilities.

• Revenue: Revenue trends show significant volatility, surging from ₹320.71 crores in 2021 to ₹1757.47 crores in 2023. However, by June 2023, it dropped to ₹322.52 crores, suggesting potential seasonal effects, market dynamics, or operational adjustments impacting short-term income generation.

• Profit After Tax (PAT): PAT has shown consistent growth, rising from ₹111.02 crores in 2021 to ₹501.12 crores in 2023. As of June 2023, it stands at ₹81.18 crores, reflecting either temporary cost pressures or reduced operational efficiency impacting net profitability.

• Reserves and Surplus: Reserves have increased significantly from ₹112.93 crores in 2021 to ₹1078.63 crores by June 2023. This growth underscores strong retained earnings and prudent reinvestment strategies, enhancing the company’s equity position and overall financial health.

• Total Borrowings: The company maintains low borrowings, with minimal debt recorded—₹10.81 crores in June 2023. This highlights a cautious financial approach, prioritizing internal funds and equity over external financing, reflecting a focus on maintaining financial discipline and reducing leverage.

• Total Liabilities: Liabilities have fluctuated, from ₹261.41 crores in 2021 to ₹195.95 crores by June 2023. This rise may stem from short-term obligations or operational costs. However, liabilities remain manageable, reinforcing the company’s ability to handle its financial commitments effectively.

Other Financial Details

• Cost of Material Consumed: The cost of material consumed has significantly increased over the years, from ₹172.23 million in FY 2021 to ₹1,045.02 million in FY 2023, showing a sharp rise. The Q1 FY 2023 figure of ₹201.56 million is consistent with this trend.

• Employee Benefits Expense: Employee benefits expense has seen a steady rise, from ₹0.83 million in FY 2021 to ₹11.26 million in FY 2023. The increase reflects higher compensation or workforce expansion. The Q1 FY 2023 figure of ₹4.96 million aligns with this upward trend.

• Finance Costs: Finance costs have remained low throughout, increasing from ₹0.26 million in FY 2021 to ₹0.93 million in FY 2023. The Q1 FY 2023 finance cost of ₹0.24 million suggests minimal interest or borrowing expenses during this period.

• Depreciation and Amortization Expense: Depreciation and amortization expenses have consistently increased, from ₹0.14 million in FY 2021 to ₹3.71 million in FY 2023. This indicates an increase in the asset base or the aging of existing assets. The Q1 FY 2023 expense is ₹1.09 million.

• Other Expenses: Other expenses have grown significantly, rising from ₹0.81 million in FY 2021 to ₹17.36 million in FY 2023. The Q1 FY 2023 figure of ₹5.85 million suggests higher operational or administrative costs, reflecting the company’s expanded activities.

Key Strategies for Denta Water and Infra Solutions Limited

• Leverage Core Competencies in the Execution of Water Management Projects

The company continues to strengthen its position in the execution of GWR projects. By leveraging its expertise, market position, and ability to manage multiple projects across various geographies, it aims to expand its water management project portfolio, focusing on larger, more complex contracts while exploring new market opportunities.

• Expanding Geographical Area of Operations

The company plans to reduce dependence on specific states by diversifying its geographical presence. By expanding into new regions like Gujarat, Madhya Pradesh, Maharashtra, and Uttar Pradesh, the company aims to capture additional growth opportunities, lower operational risks, and broaden its revenue base through a strategic focus on water management projects.

• Pursue Other Segments Within Infrastructure Development

While maintaining a focus on water management, the company seeks to diversify into other infrastructure segments, such as railways and highways. This diversification will enable the company to strengthen its industry position, fully utilise its expertise, and position itself for strategic expansion in these areas, driving long-term growth.

• Expansion into Other Geographies for Reuse of Discharge Water

With increasing water scarcity and pollution challenges, the company is focused on expanding into water reuse and recycling projects. By capitalising on government initiatives, it aims to address water management issues, particularly in urban areas, while contributing to sustainable solutions and expanding its footprint in water conservation and restoration projects.

Competitor Analysis of Denta Water and Infra Solutions Limited

• Megha Engineering and Infrastructures Ltd (MEIL)

MEIL, established in 1989, is a leader in diverse sectors such as irrigation, water management, and infrastructure, with major projects like Handri-Niva Sujala Sravanthi and Khargone Lift Irrigation. Their global reach and dedication to technology and on-time delivery make them formidable competitors. Denta, while operating in a similar infrastructure and construction space, has yet to match MEIL’s extensive portfolio and international footprint, limiting its ability to compete on such a large scale.

• EMS Ltd

EMS Ltd, founded in 1998, excels in environmental services and sustainability with expertise in sewerage systems, water supply, and waste management. It is known for innovative solutions and a strong presence in India. Compared to Denta, EMS Ltd outperforms in specialized environmental projects, while Denta lacks the same degree of niche expertise and innovation in sustainable infrastructure.

• VA Tech Wabag Ltd

VA Tech Wabag, founded in 1924, specializes in water and wastewater treatment solutions, with a global presence in sectors like desalination and water reuse. Their comprehensive technological approach positions them as a major player in the water treatment industry. Denta, while involved in similar areas, lacks the same advanced technologies and global reach, making it less competitive in high-tech water treatment solutions.

• SPML Infra Limited

SPML Infra Limited, founded in 1981, is a leading Indian infrastructure company focusing on water supply, sewage treatment, and power transmission. Recognized for its innovative solutions, it contributes to improved environmental and sanitation conditions. While SPML excels in large-scale projects, Denta stands strong in specialized water treatment and environmental infrastructure.