The Indian capital markets are flooded with Initial Public Offers (IPOs), with more companies hitting the market every month. So far in September, Vijaya Diagnostic Centre Ltd (BO:
), AMI Organics Ltd (BO:
), and Sansera Engineering Ltd (NS:
) have come up with IPOs. Another company on the list is Paras Defence & Space Technologies Ltd. The company will be the 42nd company in 2021 to raise money through the primary market.
Paras Defence & Space Technologies Ltd IPO
Paras Defence and Space Technologies' initial public offering is slated to open for subscription on 21 September 2021. The issue consisting of 1,724,490 equity shares closes on 23 September 2021. The IPO size is Rs 170.78 crore, and the IPO price band is Rs 165 – Rs 175. The application one lot consists of 85 shares. A retail investor can apply for a maximum of 13 lots consisting of 1,105 shares amounting to Rs 193,375. The company intends to use the proceeds for capital expenditure, repayment of borrowings, and general corporate purposes.
Paras Defence & Space Technologies Business
Paras Defence & Space Technologies Ltd is engaged in designing, developing, manufacturing, and testing a broad array of defence and space engineering products and solutions. It belongs to the 'Indigenously Designed Developed and Manufactured' category companies in India. The company offers services to four main verticals of the Indian defense sector: Defence and Space Optics, Defence Electronics, Electro-magnetic Pulse Protection Solution, and Heavy Engineering. It is also India's sole Indian supplier of critical imaging components, including large size optics and diffractive gratings for space applications.
Paras Defence has five significant product offerings categories: Defence and space optics, Defence Electronics, EMP Protection, Heavy Engineering for Defence, and Niche technologies. It is the only Indian company with the design capability for space-optics and optomechanical assemblies. The company has two manufacturing facilities in Maharashtra, located at Nerul in Navi Mumbai and Ambernath in Thane.
Paras Defence & Space Technologies Financials
By looking at the below table, you will realize that Paras Defence is exhibiting a declining trend in revenue. The revenue shrunk 5.2% in FY2019-20 to Rs 149.05 crore and almost 3% to 144.61 crores in FY2020-21. The profit after tax also shows an uneven trend. From a 3.62% growth in FY2019-20 to Rs 19.66 crore, it decreased 19.69% to Rs 15.79 crore in FY2020-21. The profit after tax margin also remains uneven during the last three years. Climbing to 13.19% in FY2019-20 from 12.07% in FY2018-19, the PAT margin again tumbled to 10.92% in FY2020-21.
Paras Defence Investment Rationale
Paras Defence has a broad portfolio of products and solutions for defence and space applications. The company is one of the very few producers of optics for space and defence applications in India. The government of India's 'Atmanirbhar Bharat' and 'Make in India' initiatives should push the topline growth going ahead. Apart from it, Paras Defence has robust research and development capabilities and a sharp focus on innovation. It also has a solid customer base with companies like Defence R&D Organization, Bharat Dynamics Ltd (NS: BARA ), Bharat Electronics (NS: BAJE ), Hindustan Aeronautics, and Cochin Shipyard. Other key strengths include experienced management. Note that Paras Defence does not have any listed industry peers in India. Among the significant headwinds, you should note that the company is highly dependent on Central Government and its allied entities' projects. The paras defense IPO, grey market premium, stood at Rs 200 today, almost 120% over its issue price.
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