Paras Defence IPO: All You Need To Know
Paras Defence & Space Technologies Ltd. will launch its Rs 170.8-crore initial public offering on Tuesday as it aims to expand capacity, augment working capital requirement and repay certain borrowings.
The IPO, according to the red herring prospectus, comprises a fresh issue of 80.34 lakh shares and an offer-for-sale of 17.24 lakh shares by promoter shareholders and other investors. The price band is set at Rs 165-175 apiece.
The defence and space engineering company is seeking a market value of Rs 683 crore at the upper end of the price band.
Issue Opens: Sept. 21.
Issue Closes: Sept. 23.
Face Value: Rs 10 apiece.
Lot Size: 85 shares and multiples.
Listing: BSE and NSE.
Merchant Banker: Anand Rathi
The promoter shareholding will fall from 79.4% to 59.7% after the IPO. The public will hold 40.3%.
Prior to the maiden offer, the company has raised Rs 51 crore in anchor investments from five entities.
The company plans to use funds raised via the fresh issue to:
Purchase machinery and equipment: Rs 34.70 crore.
Meet incremental working capital requirement: Rs 60 crore.
Repayment and pre-payment of certain borrowings availed from NKGSB, Kotak, Siemens Financial Services: Rs 12 crore.
Paras Defence is one of India’s few private sector companies in the “indigenously designed, developed, and manufactured” category, catering to four major segments — defence and space optics, defence electronics, electromagnetic pulse protection solutions and heavy engineering.
The company has two manufacturing facilities in Maharashtra — one in Ambernath, Thane and another in Nerul, Navi Mumbai. The research and development is mainly undertaken at its centres in Nerul and Bengaluru.
Paras Defence is also the sole supplier of critical imaging components such as large size optics and diffractive gratings for space applications in the country. Also, it derives most of its revenue from government arms and associated entities.
In the fiscal ended March 2021, the company derived revenue worth Rs 72.80 crore, or 50.80%, from the Government of India. At the end of June, it had an order book of Rs 130.50 crore from the Indian government. Its top five customers account for 59.6% of the revenue.
Paras Defence plans to expand its presence in electromagnetic pulse and venture into “unmanned aerial vehicle integration solution”. It sees this as a major source of growth.
Paras Defence’s revenue dropped for the third straight fiscal. Its operating margin rose in 2020-21 because of lower contribution of government orders during the year.
Government orders carry lower margin compared with those from the private sector.
As of March 2021, the company had an indebtedness of Rs 115 crore and a working capital requirement of Rs 161.70 crore, which is 112% of revenue.
Paras Defence has no listed peers, though it provides products to large private sector defence firms such the Mahindras and Tatas.
Loss, shutdown or slowdown of business operations may have a material adverse effect on business, results of operations and financial condition.
Business is largely dependent on contracts from the Government of India and associated entities, including defence public sector undertakings and government organisations involved in space research. Reprioritisation of defence budget will impact its revenue.
It’s developing customised products and solutions, and other R&D activities that involve risks. Such activities may not lead to satisfactory returns.
Have sustained negative cash flows from operating and investing activities in the past. It may experience a decline in earnings or operating losses or negative cash flows from investing activities in the future.