WEBSITE BSE:544387 NSE: DESCO Inc. Year: 2011 Industry: Engineering - Construction My Bucket: Add Stock
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1. Business Overview
Desco Infratech Ltd. is an Indian engineering and construction company. Its core business involves providing Engineering, Procurement, and Construction (EPC) services for various infrastructure projects. The company's business model revolves around bidding for and securing contracts from government bodies, public sector undertakings, and private clients. It then executes these projects, encompassing design, procurement of materials, construction, and commissioning. Revenue is typically generated through milestones achieved during project execution and upon project completion, with profit derived from the margin on materials, labor, and overheads.
2. Key Segments / Revenue Mix
Given its sector, Desco Infratech Ltd. likely operates across various sub-segments within infrastructure construction. Common segments for such companies include:
Roads, Highways, and Bridges
Buildings (Residential, Commercial, Institutional)
Water Supply & Sanitation Infrastructure
Industrial Infrastructure
Power Transmission & Distribution Infrastructure
Specific revenue contribution from each segment is not publicly available without financial reports. However, the mix would depend on the company's historical project focus and current order book.
3. Industry & Positioning
The Indian Engineering & Construction industry is vast, fragmented, and highly competitive, driven significantly by government spending on infrastructure development. It is cyclical and sensitive to economic conditions and policy decisions. The industry consists of a few large, diversified players, and numerous mid-sized to small regional contractors. Desco Infratech Ltd., being an "Infratech Ltd." company in India, likely positions itself as a regional or mid-tier player, competing for a range of government and private infrastructure projects within specific geographies or niche sub-sectors. Its positioning would depend on its project execution capabilities, financial strength, and track record.
4. Competitive Advantage (Moat)
The construction industry typically has relatively low moats, with competition often revolving around pricing and execution capability. Desco Infratech's potential competitive advantages could include:
Execution Track Record: A proven history of timely and quality project delivery is crucial for securing new contracts.
Client Relationships: Strong relationships with government agencies and repeat private clients can provide a stable pipeline of work.
Operational Efficiency: Effective project management, cost control, and supply chain management can lead to better margins and competitive bidding.
Regional Expertise: Deep understanding of local regulations, labor markets, and material sourcing in its operating regions.
However, strong brand loyalty or significant switching costs for clients are generally not prevalent in this industry.
5. Growth Drivers
Government Infrastructure Push: Continued high government expenditure on infrastructure projects (e.g., roads, railways, ports, urban development, water infrastructure) in India.
Urbanization and Industrialization: Growing demand for commercial, residential, and industrial infrastructure due to increasing urbanization and manufacturing growth.
Smart City Initiatives: Investment in modern infrastructure for smart cities, including digital infrastructure, sustainable transport, and waste management.
Private Sector Capital Expenditure: Revival in private sector investment and expansion plans leading to demand for construction services.
Technological Adoption: Adoption of new construction technologies (e.g., BIM, prefabrication, automation) improving efficiency and project turnaround times.
6. Risks
Project Execution Risks: Delays in project completion, cost overruns, contractual disputes, and quality issues.
Intense Competition: High competition from both large and small players leading to pressure on profit margins.
Dependency on Government Spending: A significant portion of contracts comes from government tenders, making the company susceptible to changes in government policies, funding, and priorities.
Working Capital Management: High working capital requirements, potential for delays in client payments, and challenges in managing cash flow.
Material and Labor Price Volatility: Fluctuations in prices of key raw materials (cement, steel) and labor costs can impact project profitability.
Regulatory and Environmental Risks: Delays in obtaining clearances, land acquisition issues, and changes in environmental regulations.
Interest Rate Fluctuations: Impact on borrowing costs for projects and working capital.
7. Management & Ownership
In India, many companies in this sector are promoter-led or family-controlled. Promoters typically hold a significant equity stake, demonstrating a vested interest in the company's long-term performance. The quality of management is critical for navigating complex project environments, managing financial risks, securing new contracts, and maintaining operational efficiency. Without specific information, it can be assumed that the management team would comprise professionals with experience in the infrastructure and construction sector, responsible for strategy, project execution, and financial oversight.
8. Outlook
Bull Case: A robust and sustained government push for infrastructure development, coupled with a revival in private sector capital expenditure, could lead to a healthy order book growth for Desco Infratech. Efficient project execution, stringent cost control, and effective working capital management would enable the company to improve profit margins and cash flows. Successful diversification into high-growth infrastructure sub-segments or geographies could further enhance its growth trajectory.
Bear Case: A slowdown in infrastructure spending by the government, intensified competition leading to severe pricing pressure and lower margins, or significant project delays and cost overruns could negatively impact profitability and financial health. Challenges in securing new contracts, coupled with inefficient working capital management and delays in receiving client payments, could strain liquidity and hinder future growth prospects. Furthermore, adverse changes in regulatory policies or unforeseen economic downturns could pose substantial headwinds.
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Market Cap ₹185 Cr.
Stock P/E 20.5
P/B 2.1
Current Price ₹241.6
Book Value ₹ 114.1
Face Value 10
52W High ₹293.7
Dividend Yield 0%
52W Low ₹ 122
Price goes above X
Price falls below X
PE goes above X
PE falls below X
₹ | |
| #(Fig in Cr.) |
|---|
| Net Sales |
| Other Income |
| Total Income |
| Total Expenditure |
| Operating Profit |
| Interest |
| Depreciation |
| Exceptional Income / Expenses |
| Profit Before Tax |
| Provision for Tax |
| Profit After Tax |
| Adjustments |
| Profit After Adjustments |
| Adjusted Earnings Per Share |
| #(Fig in Cr.) | Mar 2022 | Mar 2023 | Mar 2024 | Mar 2025 | TTM |
|---|---|---|---|---|---|
| Net Sales | 20 | 29 | 29 | 59 | |
| Other Income | 0 | 0 | 0 | 0 | |
| Total Income | 20 | 29 | 29 | 60 | |
| Total Expenditure | 18 | 27 | 24 | 46 | |
| Operating Profit | 2 | 2 | 6 | 14 | |
| Interest | 0 | 0 | 1 | 1 | |
| Depreciation | 0 | 0 | 0 | 0 | |
| Exceptional Income / Expenses | 0 | 0 | 0 | 0 | |
| Profit Before Tax | 1 | 2 | 5 | 12 | |
| Provision for Tax | 0 | 1 | 2 | 3 | |
| Profit After Tax | 1 | 1 | 3 | 9 | |
| Adjustments | 0 | 0 | 0 | 0 | |
| Profit After Adjustments | 1 | 1 | 3 | 9 | |
| Adjusted Earnings Per Share | 1.8 | 2.7 | 6.9 | 11.8 |
| # | 1 Year | 3 Year | 5 Year | 10 Year |
|---|---|---|---|---|
| Sales CAGR | 103% | 43% | 0% | 0% |
| Operating Profit CAGR | 133% | 91% | 0% | 0% |
| PAT CAGR | 200% | 108% | 0% | 0% |
| # | 1 Year | 3 Year | 5 Year | 10 Year |
|---|---|---|---|---|
| Share Price CAGR | -5% | NA% | NA% | NA% |
| ROE Average | 26% | 31% | 29% | 29% |
| ROCE Average | 31% | 32% | 30% | 30% |
| #(Fig in Cr.) | Mar 2022 | Mar 2023 | Mar 2024 | Mar 2025 |
|---|---|---|---|---|
| Shareholder's Funds | 4 | 5 | 12 | 59 |
| Minority's Interest | 0 | 0 | 0 | 0 |
| Borrowings | 1 | 3 | 2 | 4 |
| Other Non-Current Liabilities | 0 | 0 | 0 | 0 |
| Total Current Liabilities | 7 | 13 | 10 | 20 |
| Total Liabilities | 12 | 21 | 24 | 82 |
| Fixed Assets | 1 | 1 | 1 | 2 |
| Other Non-Current Assets | 0 | 1 | 1 | 2 |
| Total Current Assets | 10 | 19 | 21 | 79 |
| Total Assets | 12 | 21 | 24 | 82 |
| #(Fig in Cr.) | Mar 2022 | Mar 2023 | Mar 2024 | Mar 2025 |
|---|---|---|---|---|
| Opening Cash & Cash Equivalents | 0 | 0 | 0 | 0 |
| Cash Flow from Operating Activities | 0 | -2 | -0 | -12 |
| Cash Flow from Investing Activities | -0 | -1 | -1 | -1 |
| Cash Flow from Financing Activities | -0 | 2 | 1 | 44 |
| Net Cash Inflow / Outflow | -0 | -0 | 0 | 31 |
| Closing Cash & Cash Equivalent | 0 | 0 | 0 | 31 |
| # | Mar 2022 | Mar 2023 | Mar 2024 | Mar 2025 |
|---|---|---|---|---|
| Earnings Per Share (Rs) | 1.83 | 2.73 | 6.92 | 11.8 |
| CEPS(Rs) | 2.14 | 3.06 | 7.23 | 12.08 |
| DPS(Rs) | 0 | 0 | 0 | 0 |
| Book NAV/Share(Rs) | 8.56 | 11.19 | 23.98 | 76.7 |
| Core EBITDA Margin(%) | 8.35 | 7.51 | 18.93 | 22.91 |
| EBIT Margin(%) | 7.97 | 7.2 | 18.74 | 22.86 |
| Pre Tax Margin(%) | 6.06 | 5.95 | 16.94 | 20.34 |
| PAT Margin (%) | 4.16 | 4.2 | 11.76 | 15.24 |
| Cash Profit Margin (%) | 4.85 | 4.71 | 12.3 | 15.6 |
| ROA(%) | 7.04 | 7.59 | 15.58 | 17.07 |
| ROE(%) | 21.43 | 27.62 | 40.61 | 25.56 |
| ROCE(%) | 22.81 | 23.67 | 40.94 | 31.45 |
| Receivable days | 130.77 | 131.95 | 178.71 | 86.33 |
| Inventory Days | 6.36 | 4.36 | 7.37 | 11.16 |
| Payable days | 97.19 | 101.9 | 140.17 | 326.92 |
| PER(x) | 0 | 0 | 0 | 0 |
| Price/Book(x) | 0 | 0 | 0 | 0 |
| Dividend Yield(%) | 0 | 0 | 0 | 0 |
| EV/Net Sales(x) | 0.16 | 0.2 | 0.14 | -0.2 |
| EV/Core EBITDA(x) | 1.83 | 2.61 | 0.7 | -0.87 |
| Net Sales Growth(%) | 0 | 47.2 | 0.59 | 102.25 |
| EBIT Growth(%) | 0 | 33 | 161.66 | 146.72 |
| PAT Growth(%) | 0 | 48.73 | 181.78 | 161.92 |
| EPS Growth(%) | 0 | 48.73 | 153.58 | 70.62 |
| Debt/Equity(x) | 0.8 | 1.15 | 0.34 | 0.19 |
| Current Ratio(x) | 1.59 | 1.47 | 2.08 | 3.96 |
| Quick Ratio(x) | 1.54 | 1.45 | 2 | 3.82 |
| Interest Cover(x) | 4.17 | 5.76 | 10.42 | 9.09 |
| Total Debt/Mcap(x) | 0 | 0 | 0 | 0 |
| # | Mar 2025 | Sep 2025 | Mar 2026 |
|---|---|---|---|
| Promoter | 58.12 | 58.12 | 58.31 |
| FII | 5.09 | 0 | 0 |
| DII | 6.06 | 3.22 | 2.2 |
| Public | 30.73 | 38.67 | 39.49 |
| Others | 0 | 0 | 0 |
| Total | 100 | 100 | 100 |
| # | Mar 2025 | Sep 2025 | Mar 2026 |
|---|---|---|---|
| Promoter | 0.45 | 0.45 | 0.45 |
| FII | 0.04 | 0 | 0 |
| DII | 0.05 | 0.02 | 0.02 |
| Public | 0.24 | 0.3 | 0.3 |
| Others | 0 | 0 | 0 |
| Total | 0.77 | 0.77 | 0.77 |
* The pros and cons are machine generated.
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