Paras Defence IPO subscribed 16.6x on Day-1 on strong retail interest

The IPO of Paras Defence and Space Technologies was subscribed 16.6 times on Tuesday, the first day of the issue. Most of the bids so far have come from retail investors. Experts said retail investors are enthused by the high premium commanded by Paras Defence in the grey market. On Monday, the company allotted shares worth Rs 51 crore to anchor investors.

The price band for the IPO is Rs 165-175 per share. At the top-end, Paras Defence will have a market capitalisation of Rs 683 crore on a post-diluted basis. The company’s IPO comprises Rs 140.6 crore fresh fund raise and Rs 30.2 crore secondary share sale. The company is engaged in manufacturing and testing of defence and space engineering products and solutions.

For the year ended March 2021, Paras Defence had clocked net profit of Rs 16 crore on revenues of Rs 143 crore. “The IPO is valued at 43 times 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 free cash flow yield,” said a note by Reliance Securities titled ‘healthy outlook, weak financials.” “The order book as on June stood at Rs 305 crore, which is 2.13 times FY21 revenue and offers decent revenue visibility,” the note added.