Paras Defence and Space Technologies IPO sailed through during the initial hour of the first day of bidding, getting oversubscribed on the back of strong interest from retail investors.
Paras Defence and Space Technologies IPO sailed through during the initial hour of the first day of bidding, getting oversubscribed on the back of strong interest from retail investors. The Rs 171-crore initial public offering of the company, which is a mix of an offer for sale (OFS) by existing shareholders and a fresh issue of equity shares, opened today for subscription. Paras Defence and Space Technologies is an indigenously designed, developed and manufactured (IDDM) category private sector company in India, catering to four major segments of the Indian defence sector. Paras Defence shares were trading with a premium of Rs 200 per share in grey market today, or 114% over the issue price.
Retail investors oversubscribe
So far, Qualified Institutional Buyers (QIB) have not subscribed to Paras Defence and Space Technologies IPO. Meanwhile, Non-Institutional Investors (NII) have bid for 1.5 times their portion. Retail investors, however, have subscribed to their portion of the IPO 19.16 times. Retail investors have so far bid for 6.87 crore shares, for 35.85 lakh reserved for them. With this, the total subscription for the IPO has reached 9.95 times. Of the entire issue, 50% is reserved for QIBs while 15% is for NIIs and the remaining 35% is for retail investors.
Shares of Paras Defence and Space Technologies are being offered in the price band of Rs 165-175 per share. Investors can bid for the issue till Thursday, in lots of 86 shares, translating to a minimum investment of Rs 15,050 per investor. Post issue, promoter group shareholding in the company will drop to 58.6% from the current 79.4% while public shareholding will increase to 41.4% from 20.6%.
Should you subscribe?
The company’s net profit has slipped from Rs 19 crore in financial year 2018-19 to Rs 15.8 crore in the previous year, however, EBITDA and EBITDA margins have expanded. “It has negligible debt on its books which post IPO will further reduce to 0.2x. However, it is working capital intensive (~300+ days) and its asset turnover stands at below 1x, thus resulting in suppressed return ratios,” analysts at brokerage firm Motilal Oswal said in a note. “We like PDSTL given its complex/wide product portfolio, presence in niche defence space, strong client relationship and high entry barriers. The issue is valued at 1.9x P/BV (peers avg: ~2.4x) on a post issue basis, which is reasonable,” they added while pinning a ‘subscribe’ rating on the IPO.
“Being one of the few players in high precision optics manufacturing for space and defence application in India has strong R&D capabilities with focus on innovation & is well positioned to benefit from the Government’s “Atmanirbhar Bharat” and “Make in India” initiatives,” said analysts at Hem Securities. They believe the company’s strong order book gives good revenue visibility going forward. The brokerage firm has a subscribe rating on the issue.
(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)