Best Defense IPO: The issue of this defense sector company opened on September 21 and will close on September 23. The company’s issue was subscribed 16.57 times till the first day. For 71.40 lakh equity shares of the company, 11.82 crore shares have been auctioned on the first day. On September 20, the company had raised Rs 51.23 crore from anchor investors.
The reserve portion for retail investors got subscribed 31.36 times. The reserve share for non-institutional investors (NIIs) is subscribed 3.77 times. While the share of qualified institutional buyers is 1 per cent subscribed.
Paras Defense is raising Rs 171 crore from its IPO. Out of this, fresh issue worth Rs 140.6 crore has been issued while shares worth Rs 30 crore are being sold in offer for sale (OFS).
Paras Defense IPO: IPO of Paras Defense subscribed 16 times on the first day, know what is GMP
The premium for unlisted shares of the company in the gray market is running at Rs 190 on September 22. The issue price of the company is Rs 165-175. Accordingly, the unlisted shares of Paras Defense are trading at Rs 365 (175+190) in the gray market.
Paras Defense will use this amount to meet its working requirements. Part of this will go towards pre-payments of the loan. The rest of the amount will be spent on business activities. The promoters of this company are Sharad Virji Shah and Munjal Sharad Shah.
Regarding the company’s penetration in the market, ProfitMart Securities says that the company has two manufacturing plants in Maharashtra. The company will use this fund for the expansion of the Nerul plant in Navi Mumbai.
What is risk?
Looking at the company’s financial reports, its track record is not very good. According to Choice Broking, “Profit of the company has been declining at a CAGR of 14.4% from the fiscal year 2018 to 2021. While the earnings of the company has declined at a CAGR of 1.3% during this period, the EBITDA margin has been in the range of 26-30% during the last 4 fiscals. The company’s operating cash flow was negative twice out of the year.
Financial liabilities grew at a CAGR of 15.6% during this period. However, the good thing during this period is that the debt-to-equity ratio has come down, that is, the company has reduced its debt.
On the other hand, the company’s R&D capability is quite good. The government’s emphasis on Make in India project and more budget allocation to the defense sector can prove beneficial for the company. Also, the company can also benefit from the PLI scheme regarding drones. Experts say that given the small size of the IPO, good valuation and the company’s focus on the defense sector, bids can be seen manifold in this IPO.
Paras Defense is one of the few companies that provide customized projects to the Defense and Space Reserves sector. The company has two state-of-the-art manufacturing plants in Navi Mumbai and Thane. The company was started in 2009 and in the last 12 years it has successfully carved a niche for itself in the space and defense sector of India.
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