Paras Defense IPO subscribed 32 times so far on day 2; 130% increase in gray market premiums; do you have to subscribe?


Image: Reuters

Paras Defense and Space Technologies’ IPO has been underwritten more than 32 times so far on the second day of the tender, thanks to strong interest from retail investors. The IPO which was opened for subscription on September 21 was fully subscribed during the first hours. In the primary market, Paras Defense shares were trading at a premium of Rs 230, compared to the IPO price of Rs 175. Paras Defense and Space Technologies shares were trading at Rs 405 each, a premium of Rs 131 , 4%, on the gray market. , according to people who trade unlisted shares of the company. The number will be closed to subscriptions on Thursday, September 23, 2021.

So far, on day two, Qualified Institutional Buyers (QIBs) have bid for 1.5 times their share. Non-Institutional Investors (NII) made offers for 14.03 times, and retail investors subscribed to their share of the IPO 58 times. Retail investors have so far made an offer for 20 crore shares, for 35.85 lakh reserved for them. Of the entire issue, half of the issue is reserved for QIBs, 15% for NIIs and the remaining 35% for retail investors.

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Should I subscribe to the IPO of Paras Defense and Space Technologies?

Paras Defense and Space Technologies designs, develops, manufactures and tests a wide range of defense and space engineering products and solutions. It has 2 manufacturing plants in Maharashtra. Their main vertical is the lens which serves the military and space sectors. “

The backlog stands at Rs 305 crore which should arrive in the income statement at the beginning of fiscal year 22 and fiscal year 23. At Rs 175, it is valued at 31.5x P / E, 3, 2x the book value price and 4.8x the sale price. It seems costly for a company that hasn’t shown any significant growth in revenue and profits over the past 3 years, ”Aditya Kondawar, Founder, COO, JST Investments told The Bharat Express News Online. Kondawar added that the company is pivoting to a product-based, faster-turning product company with better working capital flows. They are also venturing into drones for agriculture and day / night surveillance, which remains a key control for the company.

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Research and brokerage firms such as Axis Capital, JM Financial Services, Reliance Securities, ICICI direct Research have not rated Paras Defense and Space Technologies. While Ashika Research, Arihant Capital, Canara Bank Securities and Marwadi Financial Services have recommended “subscribing” to the show.

Canara Bank Securities analysts said Paras Defense and Space Technologies is trading at a P / E of 31.53x for fiscal 2021. The company offers niche products with high barriers to entry into the market, which makes the question attractive, they added. “However, corporate debt, the high proportion of receivables, the stretched working capital cycle and dependencies on government organizations are matters of concern for long-term investors. Thus, we recommend subscribing to the show to obtain listing gains, ”analysts said.

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(The stock recommendations in this story are by the respective research analysts and brokerage firms. The Bharat Express News Online assumes no responsibility for their investment advice. Investments in the capital markets are subject to rules and regulations Please consult your investment advisor before investing.)

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