Paras Defence and Space Technologies is a 12 year old defence and space optics company with products and solutions across 5 segments. These products include High Precision Optics for Defence and Space Tech, Defence computing & Electronics, EMP Racks / EMP filters for data protection, Missile / Rocket components and indigenization of advanced global defence technologies.
It has two manufacturing facilities in the state of Maharashtra. Paras works closely with defence manufacturers who need the support of defence support systems as well as with the leading government sponsored defence and space research institutions in India. Paras specializes in design, development, manufacture and testing of an array of defence and space technology products and solutions.
In order raise fresh funds and give partial exit to early shareholders, Paras Defence will tap the primary market with an IPO of Rs.170.78 crore, which will include Rs.140.60 crore fresh issue component and an OFS component of Rs.30.18 crore. The IPO is priced in the band of Rs.165-175.
Fact check of the Paras Defence & Space Technologies IPO
The fresh issue portion of the IPO will be used to fund the purchase of plant and machinery, fund working capital requirements and partial repayment of debt. The promoters of the company including Sharad Virji Shah and Ami Munjal Shah; as well as other directors will be participating in the offer for sale (OFS).
Key Financial Metrics of Paras Defence & Space Technologies
Ahead of the IPO, the company has already completed a pre-IPO placement of 25.525 lakh shares at Rs.134.76 per share to raise a total sum of Rs.34.40 crore. Here is a gist of the financials of Paras Defence.
Paras Defence has shown a rise in EBITDA margins over the previous years but the net margins are down, showing that the gains in operations are being offset by post operational factors. The company currently has an order book position of Rs.306 crore of which Rs.203 crore pertain to Defence & space optics, Rs.71 crore to Defence Electronics and Rs.32 crore to heavy engineering. Paras has struck a series of exclusive partnerships. It had a partnership with Holland Shielding Systems of the Netherlands for EMP Protection Systems. It has tied up with HPS GMBH and Invent GMBH of Germany for large antennae for space applications, CFRP structures and applications. It has a tie-up with Kley of France to make military winches for naval avionic and armoured vehicle platforms. It also has a collaboration with Spear UAV of Israel for loitering munition drones. Most of these companies are niche leaders in their respective areas.
What should investors do with the Paras Defence IPO?
Here are some key points for investors to consider before taking a call on the IPO of Paras Defence and Space Technologies.
a) It is a very focused play on high end systems with specialization in EMS protection systems in defence and space technologies.
b) Paras has struck collaborations with niche leaders in countries like France, Israel and Germany for enhancing product delivery.
c) Its current order book is over 2-times of sales and the focus on in-sourcing defence needs under the Atma Nirbhar plan is a major boost for stocks like Paras.
d) Impressive client listing including BEL, Hindustan Shipyards, HAL, BDL, ECIL, TCS, Astra Rafael, Chaban of Israel, Amos of Belgium and Tae Young Optics of South Korea.
e) The current market cap of the company at Rs.683 crore makes it a micro-cap stock. It trades at a P/E of 43X and the sales and profits can go up multi-fold if the government continues its policy to encourage in-sourcing. Paras Defence is a very niche play with solid collaborations across the product and solutions spectrum. Its strong focus on R&D is also a major advantage. Being a micro-cap stock, it would be slightly high on risk but could be a good way to play the defence theme.
The article is for informative purpose and does not suggest to buy or sell or hold. Decision or investing is to be taken by individuals.
Evaluate investing in the IPO based on your individual risk tolerance, investment Span etc.