Paras Defence IPO Archives

Zee Entertainment announces merger with Sony Pictures Networks India

The Board of Directors of Zee Entertainment Enterprises Ltd (ZEEL) has given in-principal approval for the company’s merger with Sony Pictures Network India. Both companies have entered into a non-binding term sheet to combine linear networks, digital assets, production operations, and program libraries. The merged entity will be a publicly listed company in India. Sony’s shareholders will infuse $1.575 billion (~Rs 11,600 crore) and hold a 52.93% stake in the merged entity. Meanwhile, ZEEL’s shareholders will hold a 47.07% stake.

Read more here.

KPIT Tech to acquire 25% stake in Germany-based Future Mobility

The Board of Directors of KPIT Technologies has approved the acquisition of a 25% stake in Germany-based Future Mobility Solutions GmbH (FMS). The company will acquire the remaining stake over the next three years. The total consideration for the acquisition will not exceed €15.6 million (~Rs 135 crore). FMS is engaged in software and feature development in autonomous driving, advanced driver-assistance systems (ADAS), and vehicle safety.

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IDFC shareholders reject Vinod Rai’s reappointment to the board

The shareholders of IDFC Limited have rejected a resolution to re-appoint Vinod Rai as a non-independent, non-executive director of the company’s board. At IDFC’s annual general meeting, 62.3% of the shareholders voted against the resolution while 37.7% voted in support. Rai is currently the non-executive chairman of IDFC, and his term as an independent director ended on July 30.

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Ashoka Buildcon to acquire 49% stake in Ashoka Highways (Durg)

Ashoka Concessions (ACL) has entered into a share purchase agreement with Highway Concessions One (HC1) for purchasing a 49% stake held by HC1 in Ashoka Highways (Durg) Ltd (AHDL). The aggregate consideration for the acquisition is Rs 5 crore. ACL is a subsidiary of Ashoka Buildcon Ltd. The company already holds 51% of the issued, subscribed, and paid-up capital of ADHL.

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Excise Dept asks SpiceJet to pay GST dues of Rs 285 crore to Haryana

The Excise and Taxation Department of Haryana has asked SpiceJet Ltd to clear Goods and Services Tax dues of Rs 285.86 crore after rejecting the airline’s proposal to clear its admitted dues in installments. As per a tax authority order, SpiceJet owes Rs 163.22 crore in forward charge liability and a reverse charge liability of Rs 122.64 crore from 2019-20 till September 7, 2021.

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Jubilant Ingrevia divests 10% stake in Safe Foods Corp

Jubilant Life Sciences International-Singapore, a wholly-owned subsidiary of Jubilant Ingrevia, has divested its 10% stake in US-based Safe Foods Corporation. The consideration received for the stake sale is $18.2 million (~Rs 134.2 crore). Jubilant Ingreviais is a global integrated life science products and innovative solutions provider that serves the pharma and agrochemical industries.

Read more here.

Ramkrishna Forgings secures order worth Rs 65 crore in mining & earthmoving segment

Ramkrishna Forgings Ltd has secured an order worth Rs 65 crore from an Indian arm of Hitachi for supplying mining and earthmoving components. The order will be executed in FY22 and FY23. Kolkata-based Ramkrishna Forgings manufactures and supplies open and closed die forgings of carbon and alloy steel, micro-alloy steel, and stainless steel.

Paras Defence IPO subscribed 40.57 times on second day

The Rs 170.78 crore initial public offering (IPO) of Paras Defence and Space Technologies Ltd was subscribed 40.57 times on the final day of bidding. The IPO has received bids for 28.96 crore equity shares against the issue size of 71.40 lakh shares. Retail investors have subscribed 68.57 times against their reserved portion. Non Institutional investors (NIIs) and Qualified Institutional Buyers (QIBs) have subscribed 26.32 times and 1.67 times, respectively, against their reserved portions.

To learn more about the IPO, click here.

Route Mobile to raise Rs 2,000 crore via QIP

The Board of Directors of Route Mobile Ltd has approved a proposal for raising up to Rs 2,000 crore. The company will issue equity shares or non-convertible debt instruments on a private placement basis in one or more rounds. Route Mobile’s board will convene an Extraordinary General Meeting (EGM) on October 16, 2021, to seek the approval of the members for the proposed fund-raising activities.

Another IPO has hit the markets! This time it’s a company that works in a niche sector, the Space and Defence Equipment sector. We are talking about Paras Defence and Space Technologies Limited. The IPO opens on September 21, 2021, and closes two days later, on September 23, 2021. This article discusses the business model, finances, and the prospects of the company.

Business Model

Paras Defence And Space Technologies is engaged in designing, developing, manufacturing, and testing a wide range of defence and space engineering products and solutions. With a focus on the Defence & Space Sector, the company offers five primary product segments: Defence & Space Optics, Defence Electronics, Heavy Engineering, Electromagnetic Pulse Protection (EMP) Solutions, and Niche Technologies. The company has offices, R&D centres, and manufacturing lines in Nerul, Ambernath, and Thane in Maharashtra. Out of 341 employees, 159 are on the company’s payroll, while 182 are on contract.

The company offers services primarily to government entities. In fiscal 2021, 50.84% of the company’s total sales consisted of orders from Government of India (GoI) entities. As of June 30, 2021, 42% of the company’s total order book consists of GoI orders. The company’s clientele consists of PSU giants like Bharat Electronics Limited (BEL), Hindustan Aeronautics Limited (HAL), and Bharat Dynamics Limited (BDL).

Segment	Total Orders	Order Value (Rs crore)
Defence and Space Optics	37	202.63
Defence Electronics and EMP Protection	49	70.563
Heavy Engineering for Defence	34	31.79
Total Order Book	120	304.9

The company derives 39.20% of total revenue from private companies and 12.50% of it from exports.

Paras Defence has a first-mover advantage as there is minimal to no competition in the sector in India, especially in the optics for defence and space segment. Government policies such as Make In India and Atmanirbhar Bharat favour Paras Defence and Space Technologies.

The Ministry of Defence (MoD) has banned imports of EMP Racks, EMP filters, etc. These devices help protect electrical equipment against electromagnetic pulses arising from harmful radiations. This will help the company increase its foothold as a supplier for the product and expand its existing products portfolio by using R&D.

The company also faces the threat of cyber attacks, as it deals in a sector where confidentiality is prime. In October 2019, the company faced a cyber fraud wherein it lost close to Rs 20 lakh.

Financial Performance

Paras Defence and Space Technologies Ltd. have recorded a consistent reduction in revenue as well as profit numbers. The company hasn’t witnessed any visible growth in terms of financial metrics.

As of June 30, 2021, the order book from Government of India entities stood at Rs 130.59 crore. In the same period, the total order book stood at Rs 304.9 crore.

The company has consistently recorded negative cash flows from operating as well as investing activities. A negative cash flow occurs when a company spends more than it makes within a given period.

As of July 31, 2021, the company has a total outstanding debt of Rs 115.82 crore.

In fiscal 2021, the working capital requirement was more than the company’s revenue (~112% of total revenue). Working Capital Requirement(WCR) is the money needed to cover the costs of the production cycle, operational expenses and repayment of loans. In case the company falls short of working capital, it would impact production.

IPO In a Nutshell

The company plans to use Rs 34.6 crore towards the purchase of machinery and equipment, Rs 60 crore towards funding incremental working capital requirements, and Rs 12 crore for repayment or prepayment of all or a portion of certain borrowings/outstanding loans. The remaining funds would be used for general corporate purposes.

Should You Invest?

Paras Defence and Space Technologies offers an exciting business model yet an unexciting balance sheet. Private involvement in India’s defence sector is a relatively new venture. There aren’t many Indian companies involved that could pose as competition to Paras Defence and Space Technologies, which gives it the first-mover advantage.

The company has consistently showcased declining revenue and profits, and negative cash flows from operations and investment for the past three fiscals. Keeping numbers aside, the company poses an excellent growth potential in the long term as the defence sector opens up to more private players. One should watch out for Grey Market Premium (GMP) of the share before moving ahead. The last reported GMP of the company was Rs 215, which means that shares of the company are trading at anywhere between Rs 380-Rs 390. The company’s small issue size, untapped potential and lesser competition could positively attract investors.