Paras Defence Makes a Blockbuster Debut. Hits Upper Circuit After Listing

Paras Defence and Space Technologies shares made a blockbuster debut today.

The shares listed at a hefty premium of over 171% above their issue price on the stock exchanges.

The stock opened at Rs 475 on the BSE and at Rs 469 on the NSE, against the issue price of Rs 175 per share.

After listing, the company had a market capitalisation of Rs 18.5 bn.

It continued its momentum and hit the initial 5% upper circuit on the bourses, an intraday high of Rs 498.8 on BSE and Rs 492.5 on the NSE so far during the first few minutes of trade.

Paras Defence was the 42nd company in 2021 to raise capital through the stock market.

It's a critical player in India's defence and space research segment. The company is engaged in designing, developing, manufacturing, and testing various mission-critical defence and space engineering products and solutions.

Paras Defence received overwhelming response from investors

The initial public offering (IPO) of Paras Defence and Space Technologies, concluded earlier last month. It saw a massive response from investors and was fully subscribed within the initial hour of sale.

During the three-day bidding process, Paras Defence IPO was subscribed 304 times!

The issue was worth Rs 1.7 bn on the higher end of the price band. It was a mix of fresh issue of shares and an offer for sale (OFS) by existing shareholders.

Investors across segments strongly participated in the issue as qualified institutional buyers (QIBs) bought 169.7 times the portion set aside for them. The reserved portion of non-institutional investors was subscribed 927.7 times. Retail investors had put in bids 112.8 times the portion reserved for them.

Motive behind the IPO

The company has planned to use the proceeds towards capital expenditure worth Rs 312 m, and incremental working capital to the tune of Rs 500 m.

The company will also use the proceeds for repayment or pre-payment of certain borrowings/outstanding loan facilities of Rs 100 m as well as for general corporate purposes.

Company financials

For the financial years ended 2021, 2020, and 2019, the company's revenues were Rs 728.6 m, Rs 422.7 m, and Rs 549.9 m, respectively, from sales made to the government of India (GoI) entities. This is equivalent to 50.8%, 28.8%, and 35.6% of the total consolidated sales for these years.

As on 30 June 2021, Paras defence's orderbook from the GoI entities was Rs 1.3 bn.

The company expects to derive most of their revenues through contracts signed with the GoI entities. Contracts depend upon the continuing availability of budgets extended to the ministry of defence (MoD).

(Rs m)	FY19	FY20	FY21
Revenues	1,544.0	1,470.4	1,433.3
Revenue Growth (%)		-4.8%	-2.5%
Expenses	1,303.6	1,272.6	1,220.0
Profit Before Tax (PBT)	268.1	217.9	226.1
Net Profit	189.7	196.6	157.9

Data Source: Company's RHP

Diversified product range, new projects, and new clients

The company provides a diverse variety of products and services for both defence and space applications.

It has a variety of 33 different product and solution segments as of 31 December 2020, with many variants in each segment.

It's capacity to offer a diverse variety of goods and solutions is bolstered by high-quality products and operational performance focused on continuous improvement.

Currently, Paras Defence is developing several new products, such as turnkey submarine periscope, optical/multi/hyperspectral cameras for drones/space, telescopes, anti-drone systems, etc.

It has partnered with global technology providers to tap import substitution opportunities. This will be done under the government's 'Make In India' initiative. It will also tap global requirements.

Paras Defence's customer list has big names like ISRO, Defence R&D Organisation, Bharat Electronics, Cochin Shipyard, Hindustan Aeronautics, Bharat Dynamics. It has supplied products and solutions to private entities including Tata Power, Tata Consultancy Services (TCS), and Alpha Design Technologies.

Increasing the reach in the international market

The company primarily caters to the requirements of the Indian market. With their extensive experience and proven track record, it's also strongly positioned to cater to international customers.

The company will continue to focus on existing markets in Israel and South Korea. The management intends to provide products and solutions to customers in the United States and Europe.

The company has recently received orders from the United States and United Arab Emirates for manufacturing IR Lens and Electro-Mechanical Masts, respectively.

Grey market premium ahead of listing

Just before the listing, the grey market premium for the stock was at Rs 230-235 or 131-134%, which translated into a share price of Rs 405-410 per share against issue price of Rs 175.

The strong premium is due to the company's robust order book and its ability to benefit from the government's 'Make in India' and 'Atmanirbhar Bharat' initiatives.

About Paras Defence and Space Technologies

Paras Defence and Space Technologies is a private Indian company that designs, develops, manufactures, and tests a complete range of defence and space engineering products and systems.

It's a prominent 'Indigenously Designed, Developed, and Manufactured' private sector business in India. It serves four key areas of the Indian defence sector: military & space optics, defence electronics, electro-magnetic pulse protection solutions, and heavy engineering.

It's also the only Indian provider of essential imaging components for space applications, such as large scale lenses and diffractive gratings.

The company has 2 manufacturing plants in Maharashtra and is in the process of expanding its current manufacturing facility at Nerul in Navi Mumbai.

The company's ambition is to become one of the world's top firms in the field of optics for the defence and space sectors.

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