Paras Defence shares make stellar stock market debut, list at 171% premium

Market


MUMBAI: Paras Defence & Space Technologies Ltd made a stunning debut on stock exchanges on Friday, with its shares listing at a whopping 171% premium.

The Paras Defence stock opened at Rs475 apiece on the BSE compared with the higher end of the offer price of Rs175. At 1005am, the scrip traded at Rs498.75, having touched a high of Rs498.75. At close, the scrip was at Rs498.75, up 185%.

The Rs171-crore IPO of Paras Defence had received an overwhelming response, with the issue subscribed 304.26 times. The IPO received bids for over 217.26 crore shares compared to 71.40 lakh on offer. The price band of Paras Defence IPO was fixed at 165-175 per share.

This was also the most subscribed initial share sale since at least 2017 when Salasar Techno Engineering’s IPO was subscribed 273 times.

“The IPO is valued at 43x FY21 earnings, which does not look to be appealing. While the company states there are no comparable peers for it, other defence companies like Hindustan Aeronautics and Bharat Dynamics are trading at discounts despite generating healthy cash flows and enjoying healthy FCF yield. Notably, India is witnessing path breaking reforms in defence space and is expected to see huge traction under “Atmanirbhar Bharat” and “Make in India” initiatives,” said Reliance Securities in a note to investors.

“Further, a few PDST’s products come under the list of 101 items for which there would be an embargo on the import as per recent proposal by the Department of Military Affairs, MoD. This should essentially aid the company to see a sizable order book in the ensuing period,” the brokerage added.

The company caters to four major segments of the Indian defence sector –  defence and space optics, defence electronics, electro-magnetic pulse (EMP) protection solution, and heavy engineering.

Paras Defence plans to use the IPO proceeds to purchase machinery and equipment, funding incremental working capital requirements, repaying certain borrowings, and for general corporate purposes.

In India, clients include various defence public sector undertakings such as Bharat Dynamics Ltd, Bharat Electronics, and Hindustan Aeronautics Ltd, and private entities like Tata Consultancy Services, Astra-Rafael Comsys Pvt. Ltd., Solar Industries India Limited, Alpha Design Technologies Private Limited, among others. 

International customers are spread across Belgium, Israel, South Korea.

The company reported a total income of 149.05 crore for fiscal 2020, while consolidated net profit was at 19.65 crore.

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