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Paras Defence and Space Technologies share is all set to debut on the Indian domestic market on Friday. The share of the specialty chemicals maker Paras Defence will be listed on both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) on October 1 at 10 am. Paras Defence initial public offering (IPO) received an overwhelming response from the investors when it had opened for subscription. Paras Defence and Space Technologies IPO was subscribed 304.26 times over the 71.40 lakh shares. The strong IPO subscription, healthy financial and unique business indicate a healthy listing for Paras Defence share on October 1.
The portion reserved for the Qualified Institutional Buyers (QIBs) category was subscribed 169.65 times while that of non-institutional investors was booked 927.70 times. The quota alloted for retail investors was subscribed 112.39 times.
Ahead of the stock market listing, the share of Paras Defence and Space Technologies was tradig at ₹220 in the grey market. On October 1, the Paras Defence and Space Technologies Limited share was quoting a grey market premium of Rs 395, over the higher end of the issue price of Rs 175 per share. Paras Defence IPO GMP increased over 120 per cent over the issue price, according to IPO Watch and IPO Central data.
“Paras Defence is one of the leading providers of optics for various Indian defence and space programmes, and the only Indian company with the design capability for space-optics and opto-mechanical assemblies. Defence has remained a focus area for the government. The capital outlay by the Indian Government on defence optics, defence electronics, electromagnetic pulse (EMP) protection solution and heavy engineering is expected to increase from USD 3.2 bn in FY21 to over USD 14.5 billion by FY31 (CAGR of 16.3 per cent). The company’s offerings are aligned with these initiatives with strengths in its R&D and relationship with diverse customers,” said Anshuman Khanna, director, ValPro.
“While the company currently derives 85 per cent business domestically, it has established strategic tie-ups with global defence electronics and optics companies to enhance its product qualities to global standards, which could help the company expand its presence in the export market. The company has a promising order book of Rs 305 crore. which is over 2x of the FY21 revenue which remained almost flat vs FY20. However, in terms of pricing, other defence companies like Hindustan Aeronautics and Bharat Dynamics are trading at discounts as compared to Paras Defence,” he added.
On listing day gains, analysts believe Paras Defence IPO might double the investor’s money. “The IPO is richly valued, which lessens the possibility of strong listing gains. The grey market is super-excited about the IPO. While the Company has fixed the IPO price band at Rs 165-175 apiece, the stock is commanding a grey market premium of Rs 225-250, suggesting a potential 143 per cent listing gain over its issue price of Rs 175. Given the low ROCE and the high PE at the slated price band, we feel that the price may not sustain and will be discounted upon listing,” Khanna mentioned.
Incorporated in 2009, Paras Defence has primarily engaged in designing, developing, manufacturing and testing of a variety of defence and space engineering products and solutions. The company caters into 5 major product category offerings – 1) Defence and space optics, 2) Heavy engineering, 3) Defence electronics, 4) Electro magnetic pulse (EMP) protection solution, 5) Niche technologies.
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