Mumbai based Paras Defence is coming up with IPO that would open for subscription on 21st September 2021. Paras Defence and Space Technologies Limited is primarily engaged in the designing, developing, manufacturing, and testing of a variety of defence and space engineering products and solutions in India. Company revenue and margins are declining in the last 3 years. Should you invest in Paras Defence IPO? What are the risk factors in this IPO? Let me do IPO review and indicate whether investors should buy or not.
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About Paras Defence and Technologies Limited
Company is Indian private sector company engaged in designing, developing, manufacturing and testing a wide range of defence and space engineering products and solutions.
They are one of the leading indigenously designed developed and manufactured category private sector companies in India which caters to four major segments
1) Defence and space optics
2) Defence Electronics
3) Electromagnetic pulse protection solution
4) Heavy engineering
Company is also the sole Indian supplier of critical imaging components such as large size optics and diffractive gratings for space applications in India.
Company has 2 manufacturing plants in Maharashtra and is in the process of expanding its current manufacturing facility at Nerul in Navi Mumbai.
Paras Defence IPO details
|IPO Opening Date||21-Sep-21|
|IPO Closing Date||23-Sep-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 10 per equity share|
|IPO Price band||Rs 165 to Rs 175 per equity share|
|Lot Size||85 Shares|
|Min Order Quantity||85 Shares|
|Listing at||BSE and NSE|
|Issue Size||Total Size: Rs 170.78 Crores
Fresh issue: Rs 140.6 Crores
OFS: Rs 30.18 Crores
What are Paras Defence Limited competitive strengths?
1) Company has wide range of products and solutions offerings for defence and space applications.
2) It is one of the few manufacturers of optics for space and defence application in India.
3) Company’s offerings are aligned with the “Atmanirbhar Bharat” and “Make in India” initiatives by the government.
4) Company has strong R&D capabilities with a focus on innovation.
5) It has strong customer relationship with government arms and government organizations.
6) Company has strong experienced management.
What are the Objects of the Offer?
1) Offer for Sale (OFS) Rs 30.18 Crores: Under OFS selling shareholders would sell the shares and company would not get any proceeds from the issue.
2) Fresh issue of Rs 140.6 Crores: It would use the funds for the following:
i) Fund capital expenditure requirements.
ii) Funding incremental working capital requirements.
iii) Repayment or prepayment of all or a portion of certain borrowings/outstanding loan facilities availed by the company.
iv) General Corporate purposes.
Who is the promoter of Paras Defence Limited?
Sharad Virji Shah and Munjal Sharad Shah are the company promoters.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years.
|Financial Year ending / Period ending (Amt in Mns)|
|Profit After Tax||189.7||196.6||157.9|
Why to invest in Paras Defence IPO?
Here are the positive factors in this company.
1) Paras Defence is Indian private sector company that is engaged in designing/developing/testing/manufacturing various defence and space engineering products and solutions.
2) Company has wide rate of defence and space applications and one of the few manufacturers of optics for space and defence application in India.
Risk Factors in Paras Defence IPO
1) Its revenues and margins are declining in the last 3 years. Its revenues have fallen from Rs 157.1 Crore (FY19) to Rs 144.6 Crores (FY21). Its margins have declined from Rs 18.9 Crores (FY19) to Rs 15.7 Crores (FY21).
2) Loss, shutdown or slowdown in business operations can have impact on company business.
3) Company business is largely dependent on contracts from Govt of India and associate entities involved in space research. Decline or prioritization of Indian defence or space budget, reduction in orders may adversely impact the company business.
4) Company executed various agreements with third parties including in relation to securing contracts and manufacturing of products which imposes certain obligations. Any termination of which would have adverse effect on business.
5) Company design/develop/manufacture products and solutions which involve advanced technologies. Many of its contracts contain performance obligations that require innovative design capabilities which are technologically complex and involve high costs. Such costs may not be realized immediately and involve risks too.
6) Company has sustained negative flows from operating and investing activities in the past.
7) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
Paras Defence IPO dates for subscription, Allotment and Listing
|Finalization of Allotment||28-Sep-21|
|Initiation of Refunds||29-Sep-21|
|Credit to Demat Account||30-Sep-21|
|IPO Shares Listing Date||01-Oct-21|
Is Paras Defence IPO Price is underpriced or overpriced?
Its IPO price band is Rs 165 to Rs 175 per share.
1) On the upper price band of Rs 175 and last 3 years average EPS of Rs 6.2, the P/E ratio works out 28x.
2) If we take FY21 EPS of Rs 5.55, the P/E ratio works out to 31x.
3) Means company is asking IPO price in the P/E range of 28x to 31x.
3) There are no listed peers doing similar business, hence we cannot say whether Paras Defence IPO Share Price is underpriced or overpriced. However, if we consider this P/E in general, it is reasonably priced.
What is Paras Defence IPO GMP?
GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about IPO price as it is unorganized market.
Paras Defence IPO GMP today is between Rs 165 to Rs 170 per share.
Paras Defence IPO – Review and Conclusion
Is it good or bad to invest in Paras Defence IPO?
Paras Defence Limited is India’s private sector company which is in designing/testing/manufacturing of defence and space engineering products and solutions.
Company revenues and margins are declining in the last 3 years.
The IPO share price is reasonably priced.
It is small size IPO which can easily get oversubscribed and difficult to get allotment.
Recently Sansera Engineering had fluctuating financials and is oversubscribed. This depends on the investor’s sentiments.
Considering major negative factors, investors can AVOID this IPO as of now.
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