Paras Defence And Space Technologies Limited
Minimum Order Quantity
Paras Defence and Space Technologies Ltd – IPO
The secondary markets have been scaling new heights each week and the primary markets don’t want to be left behind. Another IPO will be hitting the markets this week. Paras Defence and Space Technologies Ltd (Paras Defence) is coming out with an IPO with an issue size of Rs. 171 crores which comprises of a fresh issue of Rs. 141 crores and an offer for sale of Rs. 30 crores.
Ø Dates: September 21, 2021 to September 23, 2021
Ø Price Band: Rs. 165 to Rs. 175 per share
Ø Minimum Lot: 85 shares
Ø Minimum Application Amount: Rs. 14,875
Objects of the Issue
The proceeds of the fresh issue are expected to be utilized towards:
Ø Purchase of machinery and equipment worth Rs. 35 crores in FY22
Ø Funding the incremental working capital requirements of Rs. 24 crores in FY22 and Rs. 36 crores in FY23
Ø Repayment or prepayment of all or a portion of certain liabilities up to Rs. 12 crores in FY22
Ø General corporate purposes
Paras Defence, incorporated in 2009, is one of the leading ‘Indigenously Designed Developed and Manufactured’ (IDDM) category Indian company which caters to five major segments of the Indian defence sector - Defence and space optics (high precision optics for thermal and space imaging), Defence electronics (used for defence applications including sub systems for border defence, missiles, tanks, etc.), Electro-magnetic pulse (EMP) protection solution (EMP racks and filters for protection of data and power lines), Heavy engineering (components for rockets, missiles, etc.) and Niche technologies (partnered with global tech companies to indigenize advance technologies in defence and space). In terms of manufacturing capabilities, the company has two facilities in Maharashtra, located in Navi Mumbai and Thane.
Paras Defence stands out as the only Indian company with the design capability for space optics and optomechanical assemblies. It is also one of the few companies with specialized technology capabilities such as manufacturing EMP protection and is expected to be an integral stakeholder in a majority of future sourcing of defence & space optics and EMP protection solutions. Moreover, with the government’s Atmanirbhar Bharat and Make in India initiatives the firm is well poised to benefit. Thus, on paper, the company looks decent. However, a slightly different picture comes forth when the financials are considered.
Revenues from operations have been continuously declining over the past three years, from Rs. 154.40 crores in FY19 to Rs. 143.33 crores in FY21. However, the numbers for FY21 should be looked at keeping in mind the closure of operations for about 4-5 months due to the pandemic. In terms of profitability, the company saw a dip too. Net Profit at Rs. 15.79 crores in FY21 came in lower than Rs. 18.97 crores reported in FY19. Resultantly, the net profit margin slid to 11.02% in FY21 from 12.29% in FY19. Similarly, returns to shareholders also took a hit, with ROE almost halving to 9.12% in FY21 from 15.93% in FY19.
On the upside, Debt-to-Equity (D/E) has been on a downtrend despite the company taking on additional debt. It appears that the net worth has expanded at a faster pace than debt. The D/E ratio dropped to 0.62x in FY21 after briefly rising to 0.75x in FY20 from 0.71x in FY19. The cash generated from operations also showed a drastic improvement and turned positive in FY21 for the first time in three years. Expectedly, cash and cash equivalents reported on the balance sheet improved to Rs. 4.68 crores in FY21 from Rs. 0.18 crores in FY19.
The company has an order book of just over Rs. 300 crores, but a significant portion of revenue is derived from a limited number of customers. Loss of any major contract may materially affect financials. Moreover, the order book seems to be inclined towards government orders and timely cash recovery could be a challenge depending on their budget allocation towards Defence. However, the management did indicate that they expect to reduce dependence on government orders by increased contribution from space optics which includes in-house manufacture of drones & space cameras.
While Paras Defence has a good presence in the space it operates, the financials are a tad bit worrisome. A continued dip in revenue going forward could hamper timely repayment of liabilities and interest. Concentration of government orders in its books also makes revenues susceptible to fluctuations in the budget allotted for defence and other government entities it caters to. Nevertheless, with the Atmanirbhar Bharat and Make in India initiatives, the tide has changed in its favor. It also plans to reduce dependence on government orders over the next few years.
With no listed competitor and limitations in relevant financial information of unlisted peers, it is not possible to make a fair assessment of its valuation on a comparative basis. Nonetheless, considering its small IPO size, Paras Defence may not take long to get fully subscribed and has a high possibility to get over-subscribed. Thus, only investors with a healthy risk appetite are recommended to SUBSCRIBE to the IPO from a listing gains perspective only.
Yes, you can always trade an IPO through a discount broker. Buying & selling an IPO becomes very easy once the trading and the demat account are set up appropriately.
Following are the benefits in buying and selling an IPOs through a discount broker. Reduced Brokerage Fee: Discount brokers charge a flat brokerage which is missing in case of full service brokers. Full service brokers usually charge %age brokerage and this incurs a lot of cost to an investors. So if any full service broker charge a brokerage of let say 0.03% then on a purchase of shares of worth of Rs 200,000 you end up paying Rs 600+ Taxes. In our case we charge a flat brokerage of Rs 20 + Taxes. Discount brokers therefore saves a lot of money of investors. Better Trading Platform: Usually discounts brokers don’t provide a good trading platform and experience but there are few discounts brokers like Samco, who are now focussing on delivering a world class trading platform and top notch user experience. Therefore narrowing down the gap between discount brokers and full service brokers.
Technically Speaking, SEBI has made mandatory to buy an IPO through ASBA channel but there is no regulation on how any investor can sell an IPO allotted shares. Therefore, smart investors can always sell IPO allotted shares through a discount broker
This is very easy, you need to do the following to buy and sell IPOs hasslefree with a discount broker. Open a trading & demat account with a discount broker. Open a trading account with a full service broker like banks which are offer IPO buying through ASBA route. While filling up the information for the demat account while opening an account with a bank, you need to give the details of demat account which is with the discount broker. Once your demat account is linked with the trading account of the bank then you simply buy and sell IPO. Investors need to understand that almost all brokers don’t charge any annual fee for trading account therefore having multiple trading accounts linked to a single demat account won’t incur any cost to investors. ,
You need to submit the following documents for opening an account with Samco : Photograph PAN Card Bank Details – Cancelled cheque or Bank Statement/Passbook copy Aadhar Card (or alternative address proof such as Drivers license, Voter ID, etc) Proof of Income (6 months bank statement or ITR Return or 3 months salary slip)