Paras Defence IPO subscribed 220 times so far on last day; grey market premium soars; should you invest?

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September 23, 2021 2:50 PM

Paras Defence and Space Technologies IPO was subscribed over 220 times so far on the last day of the bidding, on the back of robust interest from Non-Institutional Investors (NIIs).

Paras Defence and Space Technologies, IPO, Paras DefenceParas Defence and Space Technology intends to expand its production capacity, strengthen its foothold in India’s growing market. Image: Reuters

Paras Defence and Space Technologies IPO was subscribed over 220 times so far on the last day of the bidding, on the back of robust interest from Non-Institutional Investors (NIIs). In the primary market, Paras Defence shares were seen trading at a premium of Rs 255, over the IPO price of Rs 175. Paras Defence and Space Technologies shares were ruling at Rs 410 apiece, a premium of 146 per cent, in the grey market, according to the people who deal in unlisted shares of the company.

So far on day three, Qualified Institutional Buyers (QIB) have bid for 36 times their portion. Non-Institutional Investors (NII) have made bids for 750 times, and Retail investors have subscribed to their portion of the IPO 97 times. Retail investors have so far bid for 34.85 crore shares, for 35.85 lakh reserved for them. Non-institutional investors have placed bids for 115.18 crore shares, for 15.36 lakh reserved for them.

Should you invest in Paras Defence and Space Technologies IPO?

Paras Defence and Space Technology intends to expand its production capacity, strengthen its foothold in India’s growing market and also increase its international presence. Analysts said that the company would continue to focus on innovation and development which will be crucial to remaining competitive. It also plans to diversify its products and solutions portfolio through R&D and partnering with overseas technology companies with specialized technologies in the field of defence and space sector. “The financial performance of the company has been muted over the last three years due to several challenges in the sector. The key risks include decline in allocation to defence and space budget by the government; and top 5 customers account for 60% of revenues,” analysts at Religare Broking, said.

Those at Reliance Securities said that the IPO is valued at 43x FY21 earnings, which does not look to be appealing. While the company states there are no comparable peers for it, other defence companies like Hindustan Aeronautics Ltd (HAL) and Bharat Dynamics are trading at discounts despite generating healthy cash flows and enjoying healthy FCF yield, they added. “Notably, India is witnessing path breaking reforms in defence space and is expected to see huge traction under Atma Nirbhar Bharat and Make in India initiatives. Further, a few Paras Defence and Space Technology products come under the list of 101 items for which there would be an embargo on the import as per a recent proposal by the Department of Military Affairs, MoD. This should essentially aid company to see sizeable order book in ensuing period,” they 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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