Paras Defence IPO GMP, Price, Size, Company Financials, Key Risks; Should you Buy?

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Paras Defence and Space Technologies initial public offer (IPO) window for subscription is opening today on September 21 and will close on September 23. The company is eyeing Rs 170.78 crore on Tuesday. Tentatively, the company is going to make the market debut on October 1. The Paras Defence IPO has a price band of Rs 165 to Rs 175 per equity share. It also has a face value of Rs 10 per equity share. Sharad Virji Shah and Munjal Sharad Shah are the company promoters for the Paras Defence IPO.

The fresh issue aggregates up to Rs 140.60 crore, while the OFS comes up to Rs 30.18 crore with a total of 1,724,490 equity shares. This company is well known for designing, manufacturing and even testing a variety of products and solutions that come under the ambit of defence and space engineering. The company is into manufacturing of Defence and Space Optics, Defence Electronics, Heavy Engineering, Electromagnetic Pulse Protection Solutions, as well as Niche Technologies. This company is one of the very few Indian companies with the design capacity for space-optics and opto mechanical assemblies. It is also one of the leading providers of optics for various Indian defence and space programmes.

The reasons behind going public are many. The proceeds will be utilised for funding the capital expenditure. A portion of it will also go towards the repayment and prepayment of all or a portion of certain borrowings/outstanding loan facilities that were availed by the company. The rest of the funds will go towards general corporate purposes.

As far as the lot size is concerned, the Paras Defence IPO has a minimum lot size of 85 shares and an application amount of Rs 14,875. The maximum shares 1105 Shares for 13 lot Rs 1,93,375 for 13 lot. In terms of subscription, Retail-individual investors (RIIs) can apply for up to 13 lots at the higher end. The qualified institutional buyers (QIBs) have a 50 per cent reservation. The non-institutional investors (NIIs) have a 15 per cent reservation. The RIIs have a reserved portion of 35 per cent for the IPO.

Paras IPO GMP

The grey market premium of the Paras Defence IPO stood at Rs 190 on Tuesday, according to IPO Watch. Paras IPO GMP was up over 111 per cent from the higher band of the price band of Rs 165-170. High premium in the unlisted market indicates healthy listing for Paras Defence and Space Technologies IPO.

Company Profile

Paras Defence began its journey back in 2009, and after 12 years, it has successfully positioned itself as a name to recognise in India’s space and defence sector…The company has two state-of-the-art manufacturing facilities in Navi Mumbai and Thane. Paras Defence is one of the few companies that can deliver customised projects associated with defence and space research. They have a good client base with names like ISRO, Bharat Dynamics, HAL, Kirloskar Group, TCS, Tata Power and more. The company’s revenue witnessed a slight decline from Rs 148 crore to 145 crore. The profit stood at Rs 15.79 crores in 2021 against Rs 19.66 crores in 2020. The company has a stable performance in the last few years and will continue the same that will lead to a steady growth in terms of business. The IPO price band is not fixed yet. The Paras Defence IPO to list on NSE and BSE.

IPO Opening For Subscription Today, Should You Subscribe or not?

“The IPO is valued at 43x FY21 earnings, which does not look to be appealing. While company states there is no comparable peers for it, other defence companies like Hindustan Aeronautics and Bharat Dynamics are trading at discounts despite generation healthy cash flows and enjoying healthy FCF yield. Notably, India is witnessing path breaking reforms in defence space and is expected to see huge traction under “Atmanirbhar Bharat” and “Make in India” initiatives. Further, a few PDST’s products come under the list of 101 items for which there would be an embargo on the import as per recent proposal by Department of Military Affairs, MoD. This should essentially aid the company to see a sizable order book in the ensuing period,” an analyst from Reliance Securities said.

“While revenue recorded negative 4 per cent CAGR over FY19-FY21, net profit recorded negative 9 per cent CAGR during the same period. Asset turnover ratio has been less than 1x throughout the years. Notably, cash flow generation has also not been impressive for the company with cumulative OCF and FCF generation standing merely at negative Rs 0.1bn and negative Rs0.3bn, respectively over FY19-FY21,” he added.

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