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Salient features of the IPO:

* Chennai-based specialist in defence & aerospace electronics system, Data Patterns (India) Ltd. (DPIL), is coming up with an IPO to raise Rs. 590cr, which opens on 14th Dec. and closes on 16th Dec. 2021. The price band is Rs. 555 - 585 per share.

* The company has undertaken a pre-IPO placement and allotted 10.4lakh shares at Rs. 577 per shares on 29th Oct. 2021. Total amount realized was Rs. 60cr. Consequently, the fresh issue size was reduced from Rs. 300cr (as indicated in the DRHP) to Rs. 240cr.

* The issue is a combination of fresh and OFS. The company will not receive any proceeds from the OFS part of the issue. From the fresh issue net proceeds, Rs. 60.8cr will be used for the prepayment/repayment of the borrowings availed by the company; Rs. 95.2cr will be utilized to fund the working capital requirement and Rs. 59.8cr will be used for funding the upgrades & expansion of the existing manufacturing facilities.

Key competitive strengths:

* Indigenous integrated and strategic defence & aerospace electronics solutions provider, which is well positioned to benefit from the Makein-India opportunity

* Innovation focused business model

* Sound order book across product categories supplying to marquee customers in the defence & aerospace industry

* Modern certified manufacturing facility of international standards

* Consistent track record of profitable growth due to a scalable business model

* Experienced management team and skilled workforce

Risk and concerns:

* Unfavorable government policies and regulations

* Delay in the production capacity expansion

* Working capital intensive operations

* Unfavorable product-mix

* Difficulty in maintaining the profitability

* Competition

Below are the key highlights of the company:

* The government’s latest policies seek to build greater self-reliance in Indian defence R&D and manufacturing through a combination of the Aatmanirbhar Bharat mission, DAP 2020, Offsets and the Defence Production & Exports Policy. These policy tailwinds are expected to be one of the key growth drivers for the Indian indigenous defence industry. Further, according to the RHP the capital and stores allocation of the Indian defence budget is expected to grow to USD 33.2bn and USD 9.6bn, respectively, by FY31. Cumulatively the amount available during the forecast period would be USD 339bn.

* DPIL is among the few vertically integrated defence & aerospace electronics solutions provider catering to the indigenously developed defence products segment. The company’s offerings cater to the entire spectrum of defence & aerospace platforms - space, air, land and sea.

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