Paras Defence IPO subscribed 32 times so far on day 2; grey market premium rallies 130%; should you subscribe?

By: |
September 22, 2021 3:28 PM

Paras Defence and Space Technologies IPO was subscribed over 32 times so far on day two of the bidding, on the back of robust interest from retail investors.

Paras Defence IPO, Paras Defence and Space TechnologiesImage: Reuters

Paras Defence and Space Technologies IPO was subscribed over 32 times so far on day two of the bidding, on the back of robust interest from retail investors. The IPO which was opened for subscription on 21 September, got fully subscribed during the initial hours. In the primary market, Paras Defence shares were seen trading at a premium of Rs 230, over the IPO price of Rs 175. Paras Defence and Space Technologies shares were ruling at Rs 405 apiece, a premium of 131.4 per cent, in the grey market, according to the people who deal in unlisted shares of the company. The issue will close for subscription on Thursday, 23 September 2021.

So far on day two, Qualified Institutional Buyers (QIB) have bid for 1.5 times their portion. Non-Institutional Investors (NII) have made bids for 14.03 times, and Retail investors have subscribed to their portion of the IPO 58 times. Retail investors have so far bid for 20 crore shares, for 35.85 lakh reserved for them. Of the entire issue, half of the issue is reserved for QIBs while 15 per cent for NIIs and the remaining 35 per cent for retail investors.

Should you subscribe to Paras Defence and Space Technologies IPO?

Paras Defence and Space Technologies is into designing, developing, manufacturing, and testing a wide range of defence and space engineering products and solutions. It has 2 manufacturing facilities in Maharashtra. Their main vertical is optics that services the military and space sectors. ”

Order book stands at Rs 305 crore that is expected to come in the P&L in FY22 and FY23 start. At Rs 175, it is priced at 31.5x P/E, 3.2x Price to book value, and 4.8x Price to sales. This seems expensive for a company that has shown no meaningful growth in revenue and profits in the past 3 years,” Aditya Kondawar, Founder, COO, JST Investments, told Financial Express Online. Kondawar added that the company is pivoting to a product based, faster turnaround product company with better working capital flows. They are also venturing into drones for agriculture and day/night surveillance, which remains a key monitorable for the company.

Research and brokerage firms such as Axis Capital, JM Financial Services, Reliance Securities, ICICI direct Research have not rated Paras Defence and Space Technologies. While, Ashika Research, Arihant Capital, Canara Bank Securities, and Marwadi Financial Services have recommended to ‘subscribe’ to the issue.

Analysts at Canara Bank Securities said that Paras Defence and Space Technologies trades at P/E of 31.53x for FY2021. The company has niche products with high entry barriers in the market, which makes the issue attractive, they added. “However, the company’s debt, high proportion of receivables, stretched working capital cycle and dependencies on government organizations are matters of concerns for the long-term investors. Thus, we recommend subscribing to the issue for listing gains,” analysts said.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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