Paras
Defence and Space Technologies is primarilyengaged
in designing, developing, manufacturing and testing of a wide range of defence
and space engineering products and solutions. It is one of the leading 'Indigenously Designed Developed and ManufacturedCompany'
(IDDM)category private sector companiesin India with its product offerings catering to four major
segments of Indian defence sector i.e. defence and space optics, defence
electronics, electro-magnetic pulse (EMP) protection solution and heavy
engineering for defence and niche technologies. It is also the sole Indian supplier of
critical imaging components such as large size optics and diffractive gratings
for space applications in India.
Its defence and
space optics operations include manufacturing high precision optics for defence
and space applications such as thermal imaging and space imaging systems. It is
one of the leading providers of optics for various Indian defence and space
programmes, and the only Indian company with the design capability for
space-optics and opto-mechanical assemblies.
Its defence
electronics operations include providing a wide array of high performance
computing and electronic systems for defence applications, including sub
systems for border defence, missiles, tanks and naval applications. It believe
that its domain expertise in electronics for defence applications has allowed
it to contribute to some of the most prestigious defence programmes of the
country.
Its EMP
protection solutions include designing, developing, manufacturing and
commissioning various solutions for EMP Protection. It have the ability to
undertake and deliver customized turnkey projects in the defence segment,
especially in the defence electronics and EMP protection segments. It is one of
the few companies with specialized technology capabilities such as
manufacturing EMP protection and it is expected to be an integral stakeholder
in a majority of future sourcing of defence and space optics and EMP protection
solutions.
Its heavy
engineering for defence operations involves providing heavy engineering
products and solutions, such as components for rockets and missiles along with
providing mechanical manufacturing support to other verticals of the business
of the company. It specialises in high
end manufacturing for defence and space applications and have been providing
its customers with customised and exclusive mechanical products since
inception.
Under the niche
technologies division, the company have identified and partnered with some of
the leading technology companies around the world in order to indigenise
advanced technologies in the defence and space sectors for catering to the
Indian market. This also affords the company an opportunity to serve as
manufacturing partner for global requirements of such overseas technology
companies.
The company
currently have two manufacturing facilities in Maharashtra, located at Nerul in
Navi Mumbai and Ambernath in Thane. Its Nerul facility is an advanced nano
technology machining centre for producing high quality optics and ultra
-precision components and is engaged in manufacturing of Optics, Design,
Development, Manufacturing and Integration of Electronics and EMP protection
products and solutions. The Ambernath facility is engaged in manufacturing of
heavy engineering products such as flow-formed motor tubes, vacuum brazed cold
plates, titanium structures and assemblies, large and heavy dynamic structures
with built-in automation for strategic applications, indigenously designed and
manufactured flow-forming machines and mechanicalracks, cabinets and consoles
for various defence applications.
The company has
strong R&D capabilities that include product design, product engineering,
product simulation, prototyping and testing and is carried out at its centres
at Nerul in Navi Mumbai, Maharashtra and Bengaluru, Karnataka. Its research
activities are focused on creating new products and solutions which are
customised to meet customer expectations and end-user preferences and improving
its production processes and improving the quality of its existing products.
With R&D capabilities, the company is currently developing several new
products and solutions, such as hyper spectral space camera, ARINC-818 based
avionic display, naval periscopes and optical solar reflectors.
Revenue
highly dependent on projects and programmes undertaken by GoI and associated
entities, such as defence public sector undertakings and government
organizations involved in space research and GOI Entities together contributed
about 50.84% of revenue in FY21, 28.75% in FY20 and 35.62% in FY19. The company though primarily cater to the
requirements of the Indian market its export revenue from defence and space
sector stands at 16.87% and 12.50% in FY21 and FY20.
Further, as part
of growth strategy, it seek to expand into the UAV integration solutions and
services segment. Paras Aerospace Private Limited aims to offer UAV integration
solutions and UAV services for a wide range of applications such as
agriculture, power transmission, oil and gas, mining and construction. The
flagship product of Paras Aerospace Private Limited will be a Cloud based NPNT
Solution (offered as software-as-a-service) and Indigenous Multispectral Camera
for various applications including agriculture. Paras Anti-drone Technologies,
another subsidiary will design sub modules and the company will be involved in
integrating the solution. Paras Anti drone Technologies will create its own
intellectual property and technical know-how in collaboration with the
company. The company has also forged
partnership with proven international player for make in India of defence and
space products.
Offer
and object of the issue
The
Offer comprises of a freshissuance
of Equity Shares aggregating up toRs140.6 crore and offer for sale
of up to 17,24,490 Equity Shares. The offer for sale comprises sales of 1250000
equity shares by Sharad Virji Shah and 50000 equity
shares by Munjal Sharad Shah the promoter selling shareholders. Balance portion
of offer for sale comprise sale of 300000, 62245 and 62245 equity shares
respectively by Ami Munjal Shah, Shilpa Amit Mahajan and Amit Navin Mahajan,
the individual selling shareholders. Post issue the holding of promoter selling
shareholders on expanded equity will come down to 18.65% and 25.28% for Sharad
Virji Shah and Munjal Sharad Shah respectively.
The
Company intends to utilize the net proceeds from the Fresh Issue towards
purchase of machinery and equipment amounting Rs 34.657 crore, funding
incremental working capital requirements amounting Rs 60 crore, repayment or
prepayment of all or certain borrowings amounting Rs 12 crore and for general
corporate purposes.
As of July 31,
2021, its aggregate outstanding indebtedness was Rs 115.827 crore.
Strenghts
The company is a
leading IDDM category private sector company in India which caters to four
major segments of Indian defence sector with wide range of products across
defence optics, defence electronics, EMP protection solution and heavy
engineering offering one -stop solution to all its customers. As of June 30,
2021, it has a range of 34 different categories of products and solutions, with
multiple variations in each category. Its diverse products and solutions
portfolio enables it to distribute its revenue across various verticals instead
of excessive dependence on a particular product/vertical.
Order
book of the company as of June 30, 2021, remains healthy at Rs 304.992 crore,
which is 2.13 times of its FY21 consolidated sales. Of the order book about 66.4% is from defence
& Space optics, 23.1% from defence electronics & EMP protection
solutions and 10.4% is from Heavy Engineering for Defence. While the defence orders are not long term
the space sector order are more long term.
The company is
one of the few manufacturers in India with comprehensive in-house capabilities
of designing, developing and manufacturing optics for space and defence
application in India. With strong experience in working with Government space
organizations on critical space missions and being the sole Indian supplier of
diffractive gratings used in hyper-spectral imagers and infrared lenses, it has
established itself well in the Indian space market. It also specialises in
large-sized optical mirror and are the only Indian company with the design
capabilities for space-optics and opto-mechanical assemblies. It is also the sole Indian supplier of
diffraction gratings used in hyper-spectral imagers, large size optics. As a supplier to government organizations
involved in space research, the company has been a part of most of the earth
observation and space exploration missions since 2018. This positions it as one of the key
participants of value for all exploratory and observatory missions involving
large space telescopes.
Company's
horizontal integration makes it well positioned to undertake turnkey projects
in the defence sector while also being capable of supporting major tier 1
Indian defence suppliers. As one of the few companies with specialized
technology capabilities such as EMP protection solutions, the company is likely
to be an integral stakeholder in a majority of future programmes involving
local sourcing of defense and space optics and EMP protection solutions.
Some
of the products manufactured by the company such as EMP Racks, EMP filters used
for protection of data and power lines within a rack / shelter / room against
electro-magnetic pulse or interference are listed in the Import Embargo List of
110 items put out by Department of Military Affairs, Ministry of Defence. The Defence Acquisition Procedure which has come
into effect from October 1, 2020, focuses on significantly boosting indigenous
production and turning India into a global manufacturing hub of weapons and
military platforms in alignment with the Aatmanirbhar Bharat mission of
Government of India. The company with
the expertise and technological know-how and strong R&D is poised to take
advantage of the expected growth in India ’s defence industry.
At
the domestic front, the Company's customer base ranges from government
organizations involved in defence and space research to various defence public
sector undertakings like Bharat Electronics Limited (BEL), Electronic
Corporation of India Limited (ECIL) and Hindustan Aeronautics Limited (HAL);
and supply products and solutions to private entities including Tata
Consultancy Services Limited, Solar Industries India Limited and Alpha Design
Technologies Limited. Its
foreign customers include Advanced Mechanical and Optical Systems (AMOS),
Belgium, Tae Young Optics Company Limited (South Korea), and Green Optics
(South Korea) etc. Further, the company partner with international players such
as Holland Shielding Systems BV Netherlands, HPS, Gmbh and Invent, Gmbh to
provide its customers in India with products and technologies for defence and
space applications.
The
company have been and are currently associated with some of the critical
projects in India and abroad.
Weakness
Most
of contracts usually bagged by the company are fixed-price contracts and
required the company to pay liquidated damages for delay in delivery and/or
quality issues. The value of the
liquidated damages typically ranges from 5% to 10% of the value of the
contract. Thus any cost overruns, delays in delivery or failures to meet
contract specifications may have an adverse effect on its business, financial
condition and results of operations. For
the Fiscals ended 2021, 2020 and 2019 the company have paid late delivery
charges that was equivalent to 0.52%, 0.61% and 0.41%, of the revenue from
operations for the respective Fiscals.
Growth
of the company depend on its ability to qualify for and win bids undertaken by
GoI Entities for awarding contracts. Moreover, its ability to win orders also
depend on its ability to remain competitive as well as continued growth of the
defence and space sector in India and timely tendering and awarding. The
defence projects are known for long delays from time of programmed conceived or
announced to awarding.
Considering
heavy dependence on Indian defence and space sector any decline or
reprioritisation of the Indian defence or space budget, changes in GoI Entities
defence or space requirements and geo-political circumstances, reduction in
orders, termination of existing contracts, delay of existing contracts or
programmes will have a material adverse impact on the business of the company.
Top
5 customers accounted for about 59.6% and 72.27% of the revenue in FY21 and
FY20 respectively. Considering higher customer concentration any loss of
business by key customer or blacklisting by any of the key customer will impact
the business of the company.
The
business of the company involves high level of working capital as its
activities was characterised by long product development periods and production
cycles.
The
company is yet to place orders worth Rs 27.932 crore which constitutes 80.59%
of the total estimated cost in relation to the purchase of machinery and equipment
relating to proposed expansion of Nerul and Ambernath facilities.
Its
ability to complete projects in a timely manner and maintain quality standards
is subject to performance of its sub-contractors. As on June 30, 2021, 53.37%
of its total workforce was hired on contractual basis.
Optics
operating margin is higher at 50% compared to 15-25 in case of Heavy
engineering and electronics leading to swing in margin depending on revenue mix
for the year.
Valuation
Sales
for FY 2021 were down by 3% to Rs 143.33 crore and the decrease
was primarily due to disruption in supply chain and slowdown in India due to
the Covid-19 pandemic. With
operating profit margin expand by 360 bps to 30.3%, the operating profit was up
11% to Rs 43.40 crore. Sharp jump in OPM is largely due to change in revenue
mix with the contribution of optics stood higher at 45.3% compared to 34.8% in
corresponding previous period. The share of defence electronics and heavy
engineering stood at 28.3% and 26.4% for the year compared to 21.6% and 43.6%
in corresponding previous period. After accounting for lower other income which
was down 36% to Rs 1.28 crore, the PBIDT was up 8% to Rs 44.68 crore. The
interest cost was up 27% to Rs 12.41 crore and deprecation was down 1% to Rs
9.65 crore. Thus, the PBT was up 4% to Rs 22.61 crore. After accounting for
220% jump in taxation, the PAT was down 20% to Rs 15.79 crore. Jump in taxation
is largely as the company opt for tax rate under Section 115BAA of the Income Tax At and accordingly
remeasured the deferred tax asset or liabilities based on the rate prescribed
in the relevant section in This decrease was primarily due to the
change in the tax regime where the Company has opted for the tax rate under
Section 115BAA 247 of the Income Tax Act and accordingly remeasured the
deferred tax asset or liabilities based on the rates prescribed in the relevant
section in last year ended March 2020. The
net profit after MI was down 20% to Rs 15.73 crore.
The
EPS for FY2021 based on post issue expanded equity on higher price band was Rs 4
and thus the PE works out to about 43.8 times.
The
company states there is no comparable peers with similar product profile. But
companies catering to defence and space segment such as Bharat Electronics,
Hindustan Aeronatics, Sika Interplant are quoting at a PE of 23.4, 14.2 and
19.8 times respectively.
Paras Defence and Space Technologies: Issue Highlights
|
|
Fresh Issue (in Rs Crore)
|
140.60
|
Offer for sale (in equity share nos.)
|
1724490
|
Price band (Rs.)
|
|
Upper
|
175
|
Lower
|
165
|
Post-issue equity (Rs crore)
|
|
in Upper price band
|
39.00
|
in Lower Price Band
|
39.49
|
Post-issue promoter (including promoter group) stake (%) #
|
59.71
|
Minimum Bid (in nos.)
|
85
|
Issue Open Date
|
21-09-2021
|
Issue Close Date
|
23-08-2021
|
Listing
|
BSE, NSE
|
Rating
|
49 /100
|
Paras Defence and Space Technologies: Re-stated Consolidated Financials
|
|
|
1903 (12)
|
2003 (12)
|
2103 (12)
|
|
Sales
|
154.40
|
147.04
|
143.33
|
|
OPM (%)
|
27.7
|
26.7
|
30.3
|
|
OP
|
42.83
|
39.27
|
43.40
|
|
Other income
|
2.77
|
2.01
|
1.28
|
|
PBIDT
|
45.60
|
41.28
|
44.68
|
|
Interest
|
9.39
|
9.77
|
12.41
|
|
PBDT
|
36.22
|
31.51
|
32.27
|
|
Depreciation
|
9.41
|
9.71
|
9.65
|
|
PBT
|
26.81
|
21.79
|
22.61
|
|
EO Exp
|
0.00
|
0.00
|
0.00
|
|
PBT after EO
|
26.81
|
21.79
|
22.61
|
|
Tax
|
7.84
|
2.14
|
6.83
|
|
PAT
|
18.97
|
19.66
|
15.79
|
|
Minority Interest
|
0.00
|
0.00
|
0.06
|
|
Net profit
|
18.97
|
19.66
|
15.73
|
|
EPS (Rs)*
|
4.9
|
5.0
|
4.0
|
|
* on post IPO expanded equity (on upper price band) of Rs 39 crore. Face Value: Rs 10
|
EPS is calculated after excluding EO and relevant tax
|
|
|
|
|
# EPS can not be annualised due to seasonality in operations
|
|
|
Figures in Rs crore
|
|
|
|
|
Source: Capitaline Corporate database
|
|
|
|
|
|