Sunil Singhania, a prominent figure in the investment world, is renowned for his strategic focus on midcap and smallcap stocks. His investment approach centers on identifying undervalued companies with robust fundamentals and promising growth potential, all backed by meticulous research and a deep understanding of market trends. This has solidified his position as a leading investor in India. Recently, his interest has turned toward Denta Water & Infra Solutions Ltd, a company that has captured attention for its impressive performance metrics.

Denta Water & Infra Solutions Ltd: A Rising Star

Founded in 2016, Denta Water & Infra Solutions Ltd specializes in comprehensive water management solutions, including irrigation and operation & maintenance services for water projects. The company excels in water engineering and has a keen focus on infrastructure projects, particularly emphasizing groundwater recharge through the innovative use of recycled water.

Key highlights of Denta Water & Infra Solutions include:

• Expertise in Construction: They undertake significant projects in railways and highways.
• Strong Market Position: The company has established itself as a leader in its sector, particularly in groundwater recharge systems.

Recent Developments and Financial Performance

Denta Water & Infra Solutions was recently listed in January 2025, boasting a market capitalization of ₹806 crores. Although the latest financials are pending, the company reported an impressive order book exceeding ₹1,100 crores as of November 2024.

Sunil Singhania made headlines by acquiring a 1.3% stake in the company through the Abakkus Diversified Alpha Fund. This strategic move has piqued the interest of investors and analysts alike, raising questions about what makes Denta Water & Infra Solutions so appealing.

Exceptional Capital Efficiency

One of the standout features of Denta Water & Infra Solutions is its Return on Capital Employed (ROCE), a staggering 61%. This indicates that for every ₹100 invested, the company generates a profit of ₹61—a remarkable figure compared to the industry average of just 7.5%. Over the past decade, the company’s ROCE has averaged nearly 98%, significantly outperforming its peers.

A high ROCE not only demonstrates capital efficiency but also provides the company with the flexibility to reinvest profits into growth opportunities, pay dividends, or reduce debt, enhancing overall financial health.

Impressive Revenue and Profit Growth

Denta Water & Infra Solutions has shown remarkable financial growth, with sales skyrocketing from ₹32 crores in FY21 to ₹239 crores in FY24, reflecting a 95% compound annual growth rate (CAGR). The company has already recorded ₹99 crores in sales between April and December 2024, setting the stage for a strong fiscal year ahead.

• EBITDA Growth: From ₹15 crores in FY21 to ₹79 crores in FY24, marking a 74% increase.
• Profit Surge: Net profits rose from ₹11 crores in FY21 to ₹60 crores in FY24, achieving a 75% CAGR.

Stock Performance and Market Sentiment

As of April 17, 2025, the share price of Denta Water & Infra Solutions stood at ₹302, down from its initial listing price of ₹340. Despite a recent market downturn, the stock reached an all-time high of ₹378 in February 2025, showcasing its potential before the market correction.

Currently, the stock trades at a price-to-earnings (PE) ratio of 14x, significantly below the industry median of 34x, suggesting potential undervaluation. The company’s Return on Equity (ROE) is also impressive at 45%, with a three-year average of 60%, indicating effective use of shareholder funds.

Is Denta Water & Infra Solutions a Multibagger?

Singhania’s investment in Denta Water & Infra Solutions has sparked considerable discussion among investors. With impressive metrics such as high ROCE, zero debt, and substantial revenue growth, the company is positioned as a potential multibagger. As global focus intensifies on water sustainability, Denta Water & Infra Solutions could play a crucial role, especially with supportive initiatives like India’s Jal Jeevan Mission.

For investors, the decision to buy or hold shares in Denta Water & Infra Solutions is one worthy of careful consideration. Whether you’re looking to take the plunge or observe from afar, adding this stock to your watchlist may be a prudent move.

Conclusion

In summary, Denta Water & Infra Solutions Ltd exemplifies a compelling investment opportunity highlighted by strong financials and strategic direction. As always, potential investors should conduct their own research and consult with financial advisors to determine the best course of action.

Disclaimer: The information provided is for educational purposes only and should not be considered as investment advice. Always consult with a financial advisor before making investment decisions.