Paras Defence skyrockets 2.85 times offer price on stock market debut

The company now holds record for most-subscribed IPO and best-listing day performance

Shares of Paras Defence and Space Technologies gained 2.85 times their offer price at their stock market debut on Friday. The stellar gains follow its blockbuster IPO which was subscribed 318 times. The company, engaged in manufacturing and testing of defence and space engineering products, now holds the record for best-listing day performance as well as most subscribed IPO at least in the past decade.

Its stock ended at Rs 499 versus issue price of Rs 175 per share. The scrip could gain more next week as it ended at its upper trading limit.

Paras Defence’s IPO, which closed on September 23, had generated bids worth Rs 38,021 crore compared to its total issue size of Rs 170 crore. It surpassed the previous record of Salasar Technologies’ IPO, which was had garnered 273 times subscription.

"On back of a strong order book of Rs 300 crore, Paras Defence is one of the few players having an edge in defence deals because some of its products are listed on the embargo list.  Also, the IPO pricing was reasonable, at 15 times FY22E earnings. Post-listing, however, the valuations have stretched to about 45 times. Hence, it will be advisable to book profits, as sizeable gains have been made. No fresh buying is advised at these levels," said Geetanjali Kedia, Senior Research Analyst, SP Tulsian Investment Advisory Services.

For the year ended March 2021, Paras Defence had clocked net profit of Rs 16 crore on revenues of Rs 143 crore. As on June, its order book stood at Rs 305 crore, 2.13 times FY21 revenue.

Analysts said the company performance was impacted in the first half of FY21 because of COVID. But it has recovered in the second half with net margin improving to 15 per cent.

HNIs make money

High networth individuals (HNIs) bid aggressively in the IPO, with their quota seeing 974 times subscription with bids of nearly Rs 25,000 crore. After factoring the huge oversubscription and interest cost, the cost of acquisition of one share for HNI worked out to about Rs 420 per share. The huge listing day pop, however, saw the stock surpass the break-even threshold.

Defence stocks in demand

In March, shares of MTAR Technologies, which caters to clean energy, nuclear and space and defence sectors, had nearly doubled during their stock market debut. Last month, another defence sector firm Data Patterns filed its draft red herring prospectus with market regulator Sebi for a Rs 700 crore IPO.