Paras Defence IPO plans planning to raise Rs 170.78 crore in the IPO which consists of fresh issue of Rs 140.60 crore.The Paras Defence IPO has a price band of Rs 165 to Rs 175 per equity share. Paras Defence and Space Technologies Ltd. offers a wide range of Products & Solutions for Defence & Space applications
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Paras Defence IPO Details:
| Opening Date | 21-Sep-21 |
| Closing Date | 23-Sep-21 |
| Face Value | Rs 10 |
| IPO Price band | Rs 165 – 175 |
| Lot Size | 85 Shares |
| Issue Size | Fresh Issue 140.6 cr+ OFS 30.2 cr |
| QIB | 50% of the offer |
| NIB | 15% of offer- 25.62 Cr |
| Retail | 35% – 3,415,572 Shares; 59.77 Cr |
| Applications for 1x Retail | 0.4 Lac |
| BRLMs | Anand Rathi Advisors |
| Registrar | Link Intime India Pvt. Ltd. |
Video in Presentation form: Paras Defence IPO Review and Thoughts on Listing
Updates :
- ANCHOR ISSUE: Ahead of its IPO, Paras Defence and Space Technologies garnered Rs 51.23 crore from five anchor investors. Thyese includes names like Abakkus Emerging Opportunities Fund – 1, Ashoka India Equity Investment Trust, Saint Capital Fund, HDFC Trustee Company, HDFC Trustee Company.
About Paras Defence IPO
- Paras Defence and Space Technologies Limited was incorporated in 2009.
- It is engaged in the design, development, production and testing of defence and space engineering products and also solutions.
- It caters to most of the large defence companies and government sponsored defence research organizations in India.
- Major Products Lines:
- Defence optics (high precision optics for defence and space applications such as thermal imaging and space imaging systems)
- Defence electronics (high performance computing, electronic systems for defence applications, border defence, missiles, tanks and naval applications)
- Heavy Engineering (components for rockets and missiles along with providing mechanical manufacturing support to other verticals)
- Electromagnetic pulse protection systems. (EMP Racks, EMP filters used for protection of data and power lines)
- Niche technologies (partners with Other leading global technology players).
- The company has two manufacturing facilities at Nerul in Navi Mumbai and Ambernath in Thane.
- As of June 30, 2021, Paras employed 341 employees
Paras Defence IPO: Financials
| Particulars / (₹ In Cr) | 2021 | 2020 | 2019 |
| Revenue from Operations | 143.33 | 147.04 | 154.4 |
| EBITDA | 43.4 | 39.27 | 42.83 |
| EBITDA (%) | 30.28% | 26.71% | 27.74% |
| Profit Before Tax | 22.61 | 21.79 | 26.81 |
| Net Profit for the period | 15.79 | 19.66 | 18.97 |
| Equity Share Capital | 29.85 | 28.41 | 5.68 |
| Net worth | 877.43 | ||
| RONW (%) | 12.31% | ||
| Post IPO Equity | 40.00 | ||
| FV | 10 | ||
| IPO Price | 175 | ||
| EPS | 3.9 | ||
| PE | 44.33 | ||
| Market Cap | 522 | ||
| Market Cap / Sales | 3.6 |
Clintele
- ISRO
- DRDO
- Bharat Electronics Ltd
- Bharat Dynamics Ltd
- Hindustan Aeronautics Ltd.
- Electronic Corporation of India Limited (ECIL)
- Tata Consultancy Services Limited
- Solar Industries India Limited
- Godrej & Boyce
- Alpha Design Technologies Limited.
- Also caters to various foreign customers.
Cons:
Business depends heavily on projects undertaken by the central government and government departments
Business is working capital intensive
Revenues have not moved up
Poor credit rating Crisil BBB+ (outlook negative)
Salient Points and Parameters
- Order book at end of Jun 2021 was 300 crore.
- The working capital cycle has increased from 160 days in FY18 to 336 days in FY20. This is due to longer production cycle due to which company operations are working capital intensive. •Debtor days have increased from 62 days in FY18 to 225 days.
- Debt to Equity ratio declined from 0.6x in FY18 to 0.5x in FY21.
- RoE 12.9%, averaged over FY18-21
- Long Term Rating CRISIL BBB+/Negative
- Short Term Rating CRISIL A2
- Promoter currently holds 79.40% stake in the company and post-IPO this will come down to 58.94%.
- In the last 6-7 months, the company has undertaken the pre-IPO placement of worth Rs. 34.04 cr. This was raised at Rs. 125 per share in Mar-Apr 2021 and at Rs. 160 per share on Jul 2021.
- 50% of the business comes in the last quarter.
- The issue constitutes 25.02% of the post issue paid-up capital of the company i.e. 25% dilution.
- Geography-wise Revenues are depicted below:
Paras Defence IPO: Assessment
- Paras defence has ability to make high-quality optics and ultra-precision components .
- It caters to most of the large defence companies and government sponsored defence research organizations in the country.
- Monopoly in the space optics, which has high entry barriers.
- Well positioned to benefit from the Government’s “Atmanirbhar Bharat” and “Make in India” initiatives;
- Company also planning to participate in PLI for defence exports.
- Financial management leaves much to be desired.
- Stagnant Topline over the years with small size of operations.
- On financial performance front, the company’s performance is not encouraging.
- Over FY18- 21, it has reported a 1.3% CAGR decline in topline. Same period 14.4% CAGR fall in earnings.
- However EBITDA margin during the period were 26-30%. EBITDA margin expanded to 30.3% in FY21.
- Paras Defence doesn’t have any peer in the listed space.
- At the upper end of price band of Rs. 175, Paras Defence is demanding a P/E multiple of 43.4x based in its FY21 earning.
- Keeping in view it’s dominant positions in markets its operates, good growth potential, technological prowess the issue looks OK even as financial performance is unimpressive.
- It may be noted that most defence PSU are trading at quite lower PE.
- I intend to apply in Paras Defence IPO.
- May give Good Listing Gains.
- This is not due to its financials or valuation which are not supportive but more due to growth prospects
- Allotment is likely to be quite tough due to small issue size.
- Paras Defence IPO was last reported to be commanding a GMP of more than 100% of IPO price.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.