Data Patterns IPO Review and Analysis – How good is this IPO?
Data Patterns IPO (Data Patterns (India) Limited IPO) Details
Chennai based Data Patterns is coming up with an IPO that would open for subscription on 14th December 2021. Data Patterns is a defense and aerospace electronics solutions in India. Company has stable revenue growth in the last 3.5 years. Its margins grown by 4x (in terms of % of revenues) in last 3 years. Should you invest in Data Patterns IPO? This article would provide IPO details, Dates, GMP, Listing Date and conclusion on whether this is good or bad for investment.
About Data Patterns (India) Limited
Company is among the few vertically integrated defence and aerospace electronics solutions provider catering to the indigenously developed defence products industry in India. They are the fastest growing companies in the Defence and Aerospace Electronics sector in India.
Company has proven in-house design and development capabilities and experience of more than 3 decades in the defence and aerospace electronics space. Its offerings cater to the entire spectrum of defence and aerospace platforms – space, air, land and sea.
Company has design capabilities across the entire spectrum of strategic defence and aerospace electronics solutions including processors, power, radio frequencies and microwave, embedded software and firmware and mechanical engineering.
Data Patterns IPO details and Price
|IPO Opening Date||14-Dec-21|
|IPO Closing Date||16-Dec-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 2 per equity share|
|IPO Price band||Rs 555 to Rs 585 per equity share|
|Lot Size||25 Shares|
|Min Order Quantity||25 Shares|
|Listing at||BSE and NSE|
|Total Issue Size||Rs.588.22 Crores|
|Fresh issue||Rs.240 Crores|
What are the strengths of Data Patterns (India) Limited?
1) Company has indigenous integrated and strategic defence and aerospace electronics solutions provider which is well positioned to benefit from the Make in India opportunity
2) Company has innovation focused business model
3) It has sound order book across product categories supplying to marquee customers in the defence and aerospace industry
4) Company with modern certified manufacturing facility of international standards
5) Company has consistent track record of profitable growth due to a scalable business model
6) It has experienced management team and skilled workforce
What are the Objects of the IPO Offer?
Data Patterns IPO Size is Rs 588.2 Crores and below are the objects of the IPO:
1) Offer for Sale (OFS) Rs 348.22 Crores: Under OFS, selling shareholders would sell their shares and company would not get any money from this IPO proceeds.
2) Fresh issue of Rs 240 Crores: Fresh issue would be done towards the following purposes:
i) Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company.
ii) Funding working capital requirements of the company.
iii) Upgrading and expanding company’s existing facilities at Chennai.
iv) Meet general corporate purposes
Who are the promoters of Data Patterns (India) Limited?
Srinivasagopalan Rangarajan and Rekha Murthy Rangarajan are the promoters of the company.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years and 6 months.
|Financial Year ending / Period ending (Amt in Mns)|
|Profit After Tax||77.0||210.5||555.7||232.1|
Why to invest in Data Patterns IPO?
Here are the positive factors in this company.
1) Company is the well positioned defence and aerospace electronics solution provider in India.
2) Company has innovative business model with sound orderbook with prestigious customers.
3) Company has stable revenue growth in the last 3.5 years. Its revenues for FY19, FY20 and FY21 are at Rs 132.5 Crores, 160 Crores and Rs 226.5 Crores respectively.
5) Company’s margins have improved significantly in the last 3.5 years. It was generating profits of 5.8% for FY19 which improved to 24.5% in FY21. Even for 6 months ending Sep-21 it generated 23.88% profits on the revenue.
Risk Factors of investing in Data Patterns IPO
1) Company IPO objects contain Rs 348 Crores towards Offer for sale (OFS) where the money would go to selling shareholders and company would not get anything.
2) Company business is largely dependent on contracts from the GoI and associate entities including defence related public sector undertakings and government organizations. Any decline, reduction in orders or termination of existing contracts can affect business.
3) Company depends on limited number of customers such as DRDO defence PSUS like MoD, BrahMos, Aerospace and the Indian government space organization for a significant portion of its revenue. Any loss of such customers can impact the business.
4) If there is loss or shutdown or slowdown in its Design and Engineering and manufacturing facility, it can have impact on company business.
5) Continuing effect of Covid pandemic on business and operations is uncertain and cannot be predicted for future.
6) Company has significant working capital requirements. Insufficient cash flows from its operations can affect the business.
7) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
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Frequently Asked Questions (FAQs)
What is Data Patterns IPO Rating?
Company do not require to get IPO rating. Currently, Data Patterns short term rating is CRISIL A3+ and long term rating is CRISIL BBB/Stable from CRISIL Ratings.
What is the minimum amount to subscribe to this IPO?
Investors need to apply for 25 shares at minimum lower price band of Rs 555 per share = Rs 13,875. Similarly, the minimum amount to be applied on upper price band would be Rs 25 x 585 = Rs 14,625.
Is it good or bad for investment?
Company has generated stable revenue growth in the last 3.5 years. It has shown very good growth in margins in the last 3.5 years. Its margins have grown by 4x (% of revenue) during FY19 to FY21.
What is Data Patterns IPO GMP today?
GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about the IPO price as it is unorganized market. Data Patterns IPO GMP today is at Rs 330 to Rs 350 (source: Chittorgarh) as of the day of writing the article.
Data Patterns (India) Limited IPO Valuation
The Data Patterns IPO price band is Rs 555 to Rs 585 per share.
If we consider last 3 years weighted average EPS of Rs 7.72 and the upper price band of Rs 585, P/E works out to be 75x.
If we take FY2021 EPS of Rs 11.89 and the upper price band of Rs 585, P/E works out to be 49x.
If we take 6 months ended Sep-21 EPS and annualize for FY22, P/E works out to be 59x.
Means company is asking IPO price of Rs 585 in the P/E ratio of 49x to 59x.
There are listed peers like Paras Defence trading at P/E 139x (Highest) and Bharat Electronics trading at P/E 23x (Lowest). Hence Data Patterns IPO Price at P/E of 49x to 59x is reasonably priced.
Data Patterns IPO dates for subscription, Allotment and Listing
|Finalization of Allotment||21-Dec-21|
|Initiation of Refunds||22-Dec-21|
|Credit to Demat Account||23-Dec-21|
|IPO Shares Listing Date||24-Dec-21|
Data Patterns IPO Review and Analysis
After going through all these points, you might be wondering whether Data Patterns IPO is good or bad for investment?
Data Patterns (India) Limited is a strategic defence and aerospace electronics solutions provider in India. Company has good order book and comes up with innovation focused business model.
Company has generated strong revenue growth in the last 3.5 years.
Company had 4x growth in margins (% of revenue) during FY19 to FY21.
The IPO price seems to be reasonably priced.
Stock markets are volatile and taking corrections now and then, hence investors should be little cautious about investing in IPOs.
Considering all these positive and risk factors indicated above, investors can invest in this IPO. If such company shares are available at discounted prices post listing, investors can add some more and invest for medium to long term perspective.
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