Bengaluru based DCX Systems is coming up with an IPO now. This IPO would open for subscription on 31st October, 2022. DCX Systems is one of the leading Indian players in the manufacture of electronic sub-systems and cable harnesses. Should you invest in DCX Systems IPO? This article would provide IPO details, Dates, GMP, Listing Date and conclusion on whether this is good or bad for investment.
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About DCX Systems Limited
Company is the leading Indian players in the manufacture of electronic sub-systems and cable harnesses. Company has commenced operations in 2011. It has been a preferred Indian Offset Partner for foreign original equipment manufacturers for executing aerospace and defence manufacturing projects.
After 10 years, the company commissioned a new manufacturing facility at the Hi-Tech Defence and Aerospace Park SEZ in Bengaluru, Karnataka.
Currently, DCX Systems had 26 customers in Israel, United States, Korea and India. This includes Fortune 500 companies, multinational corporations and start-ups. Its customers include domestic and international OEMs, private companies and public sector undertakings in India across different sectors, ranging from defence and aerospace to space ventures and railways.
Company’s business has 3 major verticals:
1) System integration in areas of radar systems, sensors, electronic warfare, missiles, and communication systems.
2) Cable and Wire Harness Assemblies.
3) The company supplies assembly-ready kits of electronic and electro-mechanical parts.
DCX Systems IPO Details
| IPO Opening Date | 31-Oct-22 |
| IPO Closing Date | 02-Nov-22 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 2 per equity share |
| IPO Price band | Rs 197 to Rs 207 per equity share |
| Lot Size | 72 Shares |
| Min Order Quantity | 72 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 500 Crores |
| Fresh issue | Rs. 400 Crores |
| OFS | Rs. 100 Crores |
What are the strengths of DCX Systems Limited?
1) It is among the preferred Indian Offset Partners for the defence and aerospace industry with global accreditations
2) Company is technology enabled and scalable end-to-end capabilities
3) Company business model with visibility of cash flows and ability to mitigate operational and technology risk
4) It has strategically located in aerospace Special Economic Zone with an advanced and modern manufacturing facility
5) It is well-positioned to capitalize on industry tailwinds
6) Company has track record of consistent financial performance
7) It has experienced and qualified Promoters and senior management team supported by a committed employee base
What are the Objects of the IPO Offer?
DCX IPO Size is Rs 500 Crores which has OFS and fresh issue.
1) Offer for Sale for Rs 400 Crores: Under OFS, selling shareholders would sell their shares and the company would not get any money from this IPO proceeds.
2) Fresh issue of Rs 100 Crores: Under fresh issue, company proposes to utilise the proceeds for the following:
- Repayment/ prepayment, in full or part, of certain borrowings availed of by the company.
- Funding working capital requirements of the company.
- Investment in our wholly owned Subsidiary, Raneal Advanced Systems Private Limited, to fund its capital expenditure expenses.
- General corporate purposes.
Who are the promoters of DCX Systems Limited?
NCBG Holdings Inc and Vng Technology Private Limited 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 3 months. While FY20 and FY21 are standalone numbers, FY22 onwards, these are consolidated numbers.
| Financial Year ending / Period ending (Amt in Crores) | ||||
| Particulars | FY20 | FY21 | FY22 | 30-Jun-22 |
|---|---|---|---|---|
| Total Assets | 698.9 | 793.2 | 763.4 | 1,011.6 |
| Revenues | 465.2 | 683.2 | 1,124.3 | 220.2 |
| Profit After Tax | 9.7 | 29.6 | 65.6 | 5.5 |
| Profit % | 2.09% | 4.33% | 5.83% | 2.50% |
Why to invest in DCX Systems IPO?
Here are the positive factors in this company.
1) Company is among the leading Indian players in the manufacture of electronic sub-systems and cable harnesses.
2) It is among the preferred Indian Offset Partners for the defence and aerospace industry with global accreditations.
3) Company has strong revenue growth in the last 3 years. While it is not apple to apple comparison to compare standalone revenues with consolidated revenues, its revenues increased from Rs 465.2 Crores in FY20 to Rs 1,124.3 Crores in FY22.
4) Company margins are improving year on year. Its margins were at Rs 9.7 Crores in FY20 (2%) and 65.6 Crores in FY22 (5.8%).
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Risk Factors of investing in DCX Systems IPO
1) Significant amount of company IPO proceeds goes to OFS and company would not get anything from this.
2) Company revenues from top 3 customers accounted for over 80% in the last 1 year and 3 months. Any loss of these customers can impact revenues of the company.
3) Company revenues significantly on offset defence contracts. Any negative change in offset defence policy can affect the revenues of the company.
4) Company orderbook has increased from Rs 1,941 Crores in 2020 to Rs 2,369 Crores in FY22 and majority of them needs to be executed during 2023 to 2025. Investors should not assume that such orderbook would translate into immediate revenues.
5) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
Frequently Asked Questions (FAQs)
[sc_fs_multi_faq headline-0=”h3″ question-0=”What is DCX Systems IPO date?” answer-0=”This IPO would open on 31st October, 2022 and closes on 2nd November, 2022.” image-0=”” headline-1=”h3″ question-1=”What is DCX Systems Share Price?” answer-1=”The IPO share price band is Rs 197 to Rs 207 per share.” image-1=”” headline-2=”h3″ question-2=”How much portion allocated to each group of investors in this IPO?” answer-2=”1) QIB – Not less than 75% of the offered shares 2) NII / HNI – Not less than 15% of the offered shares 3) Retail – Not less than 10% of the offered shares” image-2=”” headline-3=”h3″ question-3=”Is it good or bad for investment?” answer-3=”Investor should always invest in a company that has strong financial track record. This company has generated strong revenue growth in the last 3 years and 3 months. While its margins are thin, these are improving year on year.” image-3=”” headline-4=”h3″ question-4=”What is DCX Systems IPO GMP today?” answer-4=”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. DCX Systems GMP as per IPOCentral – Rs 50 DCX Systems IPO GMP Chanakya – Nil DCX Systems IPO GMP IPOWatch – Nil” image-4=”” count=”5″ html=”true” css_class=””]
IPO of DCX Systems Valuation
DCX Systems IPO price band is Rs 197 to 207 per share.
If we consider FY2022 EPS, the P/E ratio works out to be 22x.
If we consider last 3 years weighted EPS, the P/E ratio works out to be 33.2x.
Margins for Q1 of FY23 have declined and if we annualise them, the P/E works out to be 72x.
Means company is asking for issue price in P/E of 22x to 72x. There are listed peers like BDL trading at P/E 32x (Lowest) and Paras Defence trading at P/E 84x (Highest) and industry average P/E is 62x. Hence DCX proposed Share Price is fully priced.
Tracxn Share Prices for subscription, Allotment and Listing
| Offer Open | 31-Oct-22 |
| Offer close | 02-Nov-22 |
| Finalization of Allotment | 07-Nov-22 |
| Initiation of Refunds | 09-Nov-22 |
| Credit to Demat Account | 10-Nov-22 |
| IPO Shares Listing Date | 11-Nov-22 |
How to buy DCX Systems IPO online through Zerodha?
If you do not have Zerodha account, sign-up here and proceed to the next step.
If you have a demat account with Zerodha, you can apply this IPO online using the UPI as a payment gateway. Zerodha customers can apply in this IPO by login into Zerodha Console submitting an IPO application form.
Follow below steps to apply this IPO in Zerodha platform:
1) Visit the Zerodha portal and login to the console.
2) Go to Portfolio and click the IPOs link.
3) Visit ‘DCX Systems Limited IPO’ row and click the ‘Bid’ button.
4) Enter your UPI ID, Qty and the Price which you want to bid.
5) Click on ‘Submit’ IPO application form.
6) Visit the UPI App (net banking or BHIM) to approve the mandate.
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DCX Systems IPO Review – Should you invest or avoid?
After going through all these points, you might be wondering whether DCX Systems IPO is good or bad for investment?
Company is the leading manufacture of electronic sub-systems and cable harnesses in India. It is among the preferred Indian Offset Partners for the defence and aerospace industry with global accreditations. Company has generated strong revenue growth in the last few years. Its margins are also improving year on year.
On other side, its margins are declined for Qtr ending Jun-2022. Its top 3 customers contribute to over 80% of its revenues. Loss of any such customers can have significant impact on the revenues of the company. Its issue price also fully priced.
Its risky IPO considering that it is aggressively priced. Many defence stocks have run-up heavily in the last few months and P/E ratio have shot up. I would personally like to wait and watch such companies for another couple of quarters. If such companies are available at discounted prices post listing, I would like to add them to my stock portfolio. I am not in a hurry to invest in such IPO as of now.
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Mr Suresh, You have touched all the points to be analysed by the Investor before investing in DCX IPO.The critical point is with such high PE going forward is to be watched critically before venturing.
Wonderful analysis.
Thank you Surya Prakash
Suresh has rightly advised to not jump in,very very exaggerated claims by the company, pls compare the Order Book figures vs Revenue ! elsewhere it is also claimed that its peers include BEL,BDL,Paras etc which is laughable !
Wish you Happy Diwali Suresh ji,. You have done DCX IPO analysis very nicely, as usual. Thank you
Thank you Sanjeev. Wishing you all a happy and safe Diwali.