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Salient features of the IPO:

Paras Defence and Space Technologies Ltd. (PDSTL), which provides defence and space engineering products & solutions is coming up with an IPO to raise around Rs. 170cr, which opens on 21st Sept. and closes on 23rd Sept. 2021. The price band is Rs. 165 - 175 per share.

* The issue is a combination of fresh and OFS. The company will not receive any proceeds from the OFS part of the issue. Of the net proceeds from the fresh issue, Rs. 34.7cr will be used for the purchase of machinery & equipments, Rs. 60cr will be utilized to fund the working capital requirements and another Rs. 12cr will be used to repay/pre-pay certain debt availed by the company.

* In the last 6-7 months, the company has undertaken the pre-IPO placement of total 0.255cr equity shares for cash consideration aggregating to Rs. 34.4cr. However, the size of the fresh issue has not been reduced by the company. The shares were offered in the range of Rs. 125 - 160 per share. 

Key competitive strengths:

* Offer a wide range of products & solutions for both defence and space applications

* One of the few players in high precision optics manufacturing for space and defence application in India

* Strong R&D capabilities with a focus on innovation

* Well positioned to benefit from the Government’s “Atmanirbhar Bharat” and “Make in India” initiatives

* Strong relationships with a diverse customer base

* An experienced management team

Risk and concerns:

* Unexpected change in government policies and regulations

* Revenue concentration risk

* Lumpy business

* Working capital intensive business

* Competition

Below are the key highlights of the company:

* PDSTL is engaged in designing, developing, manufacturing and testing of a wide range of defence and space engineering products & solutions. The company is the sole Indian supplier of critical imaging components such as large size optics and diffractive gratings for space applications in India. It is also one of the leading “Indigenously Designed Developed and Manufactured” category private sector companies in India, which caters to the four major segments of Indian defence sector i.e. defence & space optics, defence electronics, electro-magnetic pulse (EMP) protection solution and heavy engineering.

* The outlays by the Indian government on the above-mentioned four segments is expected to increase from around USD 3.2bn in 2021 to over USD 14.5bn by 2031, mainly due to extensive fleet recapitalization, C4ISR orientation and greater indigenous supply preferences. The cumulative market during the same time is anticipated to around USD 99.4bn.

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