Paras Defence IPO opens next week. All you need to know

Paras Defence and Space Technologies Ltd will launch its initial public offering (IPO) next week, seeking to benefit from bullish sentiment that has pushed stock markets to record highs.

The defence engineering company’s IPO will open on September 21 and close two days later. It has set a price band of Rs 165-175 a share for the IPO.

Paras is the 42nd company to float an IPO in 2021, underlining the rush among Indian firms to launch share sales this year. In addition, an equal number of companies have filed their draft red herring prospectuses (DRHPs) and are awaiting approval from the Securities and Exchange Board of India.

This IPO rush comes even as benchmark indices continue to touch new highs. The 30-stock BSE Sensex, for instance, hit another record on Friday, going past 59,700 before cooling off. 

The Paras IPO comprises a fresh issue of shares worth Rs 140.6 crore and an offer for sale of up to 17.24 lakh shares by its existing shareholders including the promoters Sharad Virji Shah, Munjal Sharad Shah and Ami Munjal Shah.

The founders—chairman Sharad Virji Shah and managing director Munjal Sharad Shah—hold a 59.53% stake in Paras Defence. The total promoter and promoter group stake in the company is 79.4%.

Ahead of the IPO, Paras Defence mopped up Rs 34 crore through a pre-IPO sale.

The company plans to use the money raised from the fresh issue to buy machinery and equipment. It also plans to fund working capital requirements, repay debts and use the money for general corporate purposes.

Paras Defence’s business

The company designs, develops, manufactures and tests a range of defence and space engineering products. It caters to four major segments—defence and space optics, defence electronics, electro-magnetic pulse (EMP) protection solutions, and heavy engineering.

It is also the sole Indian supplier of critical imaging components such as large-sized optics for space applications. It has two manufacturing facilities in Maharashtra, located at Nerul in Navi Mumbai and Ambernath in Thane. 

The Nerul plant is an advanced nano-technology machining centre to produce high-quality optics and ultra -precision components. The Ambernath facility makes heavy engineering products such as flow-formed motor tubes, vacuum brazed cold plates, titanium structures and assemblies. The company is expanding the Nerul facility.

Paras gets most of its revenue from defence public-sector undertakings and government organisations involved in space research. Its customers include Bharat Electronics Ltd, Hindustan Aeronautics Ltd, Bharat Dynamics Ltd, Hindustan Shipyard Ltd, Electronic Corporation of India Ltd, Tata Consultancy Services Ltd and Solar Industries India Ltd. Its foreign customers include Advanced Mechanical and Optical Systems of Belgium and Tae Young Optics Company of South Korea.

Paras Defence’s financials

The company’s top line hasn’t grown in the last two years and its profit has fallen. 

Its consolidated total income was Rs 144.6 crore for the year ended March 31, 2021, down from Rs 149 crore and Rs 1,57.17 crore for the previous two years. 

Its consolidated profit after tax fell to Rs 15.78 crore in 2020-21 from Rs 19.66 crore the year before and Rs 18.97 crore in 2018-19.

The company had an order book of Rs 305 crore as of June 30, 2021.