Data Patterns (India), promoted
by Srinivasagopalan Rangarajan and Rekha Murthy Rangarajan, is a vertically
integrated defence and aerospace electronics solutions provider catering to the
indigenously developed defence products industry. It offers products catering
to the entire spectrum of defence and aerospace platforms such as space, air,
land and sea. Major products or product groups of the company comprises (i)
Radars, (ii) Underwater electronics / communications / other systems, (iii)
Electronic warfare suite, (iv) BrahMos programme, (v) Avionics, (vi) small
satellites, (vii) ATE for defence and aerospace systems, (viii) Commercial off
the shelf (COTS).
Core competencies of the company include
electronic hardware design and development, software design and development,
firmware design and development, mechanical design and development, product
prototype design and development, manufacturing, functional testing and
validation, environment testing and verification, and after sales support
engineering services.
It has design capabilities across
the entire spectrum of strategic aerospace and defence electronics solutions
including processors, power, radio frequency and microwave equipment, embedded
software and firmware and mechanical engineering.
The company have invested in and
developed reusable building block model leading to capabilities / competence
across various product domains. This approach has allowed it to achieve better
margins due to spreading out of development costs over multiple programmes, in
addition to saving on development time for new products.
Several of its existing products
or their component modules or building blocks are pre-approved by its
customers, especially defence-sector public sector undertakings (“DPSUs”) and
government ministries and departments and this gives the company the benefit of
reduced lead times for development of new products.
The company participates in all
three production, development and service contracts. In FY21 & H1FY22, the
production contracts contributed 76% & 83.6% of the revenue and development
contracts about 16.3% & 6.7% and service contracts about 7.7% & 9.7% of
the revenue.
The company is currently engaged
in the supply of critical products to several prestigious defence projects in
India, including the Light Combat Aircraft (LCA), the HAL Dhruv, Light Utility
Helicopter (LUH) and the BrahMos missile programme, precision approach radars
and various communications intelligence (COMINT) and electronic intelligence
(ELINT) systems. In each of the above
projects, its products form critical components, such as the launch systems for
the ground based BrahMos missile launcher, flight and safety critical “take me
home” displays for the Tejas.
It has received single vendor
orders from Defence Electronics Research Laboratory (DLRL) for development and
supply of all of the COMINT search receivers, Direction Finder, Monitoring
receivers for the Dharashakti programme. This order/project is a development
programme for large Electronic Warfare (EW) requirement for Deserts and Plains
and has been nominated to BEL. This places Data Patterns in a position to be an
OEM for the entire receiver systems with likely revenues of USD 50 million on
complete execution of the programme. The
expertise gained in the project would also position Data Patterns to cater for
airborne COMINT and ELINT equipment for various upgrades such as MI 17
Upgrades, Dornier Upgrades, Aerostat upgrades, and any new rotary wing
programmes.
Using its experience of working
with the DRDO and from development of the wind profile radar, the company have
successfully bid for and obtained an approximately Rs 380 crore contract from the Ministry of
Defence for nine precision approach radars for the Navy and Air Force, which
are currently in the delivery stage.
Currently the manufacturing
facility of the company consists of a 100,000 square feet factory built on 5.75
acres of land in Chennai, which has facilities for design, manufacturing,
qualification and life cycle support of high reliability electronic systems
used in defence and aerospace applications. The company is also in the process
of upgrading and expanding its Chennai facility. The
company is proposing to acquire an additional 2.81 acres of adjacent land for
further expansion.
The Offer & Object of the
Issue
The current initial public offer
comprises a Fresh Issue aggregating to Rs 240 crore and an Offer for Sale of up
to 5,952,550 Equity Shares with promoters together selling 3934025 shares [1967013
equity shares by Srinivasagopalan Rangarajan; 1967012 shares by Rekha Murthy
Rangarajan]. Balance portion of OFS comprises sale by
other selling shareholders of 489775 equity shares [75000 shares by Sudhir
Nathan; 414775 shares by GK Vasundhara] and Individual Selling Shareholders
collectively selling about 1528750 shares.
The company earlier in Nov 2021,
made a private placement (pre-IPO placement) of 1,039,861 Equity Shares at a
price of Rs 577/share aggregating to Rs 60 crore.
Post IPO, the selling promoters
i.e. Srinivasgopalan Rangarajan and Rekha Murthy Rangarajan hold 24.6% and
20.39% of expanded equity. The other
selling shareholders Sudhir Nathan and G K Vasundhara hold about 0.19% and
0.63% of post IPO expanded equity.
Proceeds from the issue will be
used to repay debt, meet working capital needs and upgrading and expanding its
existing facility at Chennai to the tune of Rs 60.803 crore, RS 95.191 crore and
Rs 59.839 crore respectively.
Aggregate outstanding
indebtedness of the company as of November 20, 2021 was Rs 62.248 crore.
Strengths
Strong order book of RS 581.298
crore as on September 30, 2021. Of the current order book production contracts
were Rs 389.817 crore; development contracts Rs 123.346 crore; and Service
Contracts Rs 68.135 crore. In terms of product categories Radars accounts for
major junk at Rs 362.807 crore followed by Services with Rs 68.435 crore,
Avionics at Rs 41.023 crore.
Client profile of the company
comprise several marquee customers in the Indian defence ecosystem including
the Indian government defence ministry, BrahMos, DRDO, the Indian government
space organisation, HAL, BEL and a DPSU involved in the missile space.
Building complete systems from
the building blocks and sub-systems already developed, provides a higher value
addition while distributing development costs. The company have more than 1000
building blocks that can be used on multiple end systems in defence and space.
Given over three decades of
presence (including through its erstwhile subsidiary) in defence and
aerospace electronics space and strong proven in-house design, development and
manufacturing capacity across the entire spectrum of aerospace and defence
electronics, the company is well positioned to take part in land, airborne and
naval defence programmes as well as space programmes of the country.
End-to-end in house capabilities
to design, build and deliver complete systems gives it significant competitive
benefits in competitive bidding for defence and aerospace projects.
The manufacturing infrastructure of
the company is certified by international A&D OEMs.
Favourable GOI policies that seek
to build greater self-reliance in Indian defence R&D and manufacturing
through a combination of Aatmanirbhrar Bharat mission, DAP 2020, Offsets and
the upcoming Defence Production and Export policy. The top 3 capital acquisition categories of
DAP 2020 i.e. Buy IDDM (Indigenously Designed Developed and Manufactured), Buy
Indian and Buy & Make Indian emphasize on Indian company led defence
modernisation with an Indigenous content (IC) category of at least 50%. Moving
forward several high value tenders are expected to fall into these categories
giving both private Indian defence primes and sub system suppliers ample
opportunities in increasing revenue and technology base.
Weakness
Most of contracts usually bagged
by the company are fixed-price contracts and requires the company to pay
liquidated damages for delay in delivery and/or quality issues. The value of the liquidated damages typically
ranges from 0.5% per day/week of delay to a maximum of 5%-10% of the
undelivered portion 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.
Purchases from foreign supplier's stands at about 74.46% and 63.68% of total purchases in H1FY2022 and FY2021 and
this exposes the company to various risks such as forex risk, cost of
acquisition, high lead supply time or shortage forcing higher level of
inventory straining working capital apart from hurting operations.
One of the promoters of the
company, i.e., Srinivasagopalan Rangarajan have pledged 12521025 equity shares,
which is 98.1% of his holding & 53.6% of total promoter holding post OFS.
The defence projects/programmes
are known for long delays from time of conceived/announced to awarding and
completion. The company derived 52.58% of its FY2021 revenue from various public
sector undertakings and defence-related organizations and any significant
change in GOI's policies/capex plans regarding defence/space will hurt growth. Its growth also depends on ability to qualify
and win in competitive bids.
Yet to obtain certain approvals
from regulatory authorities for proposed expansion project.
No registered trademarks,
including the trademark for its trade name or the corporate logo.
Valuation
Sales for the fiscal ended March
2021 was up by 43% to Rs 223.95 crore with sharp jump in revenue of services
and development contracts. While the service contract revenue was up 51% to Rs
17.32 crore that of development contract was up 27552% to Rs 36.50 crore. The
revenue from production contact was up 18% to Rs 170.13 crore. On better
revenue mix the OPM expand by whopping 1350 bps to 41.1% and thus the operating
profit jumped up by 113% to Rs 91.99 crore. Eventually the PAT was up 164% to
Rs 55.57 crore.
The company for end Sep 2021 reported
a TTM PAT of Rs 85.16 crore on sales of Rs 275.92 crore. The TTM EPS based on
post issue expanded equity on higher price band is Rs 16.4 and PE works out to
35.7 times. The P/BV works out to 6.6
times.
In comparison the companies
catering to defence and space segment such as Bharat Electronics, Hindustan Aeronautics,
MTAR Technologies, Paras Defence, Astra Microwave, Sika Interplant and High
Energy Batteries are quoting at a TTM PE of 22.1, 12.5,130.2, 321.6, 43.9, 24.4
and 16.8 times and P/PV of 4.4, 2.7, 14.4,8.0. 4.1, 5.3 and 6.6 times,
respectively.
Data
Patterns (India): Issue Highlights
|
Fresh
Issue (in Rs. Crore)
|
240
|
Offer
for sale (in no. os shares)
|
5952550
|
Price
band (Rs.)
|
|
Upper
|
585
|
Lower
|
555
|
Post-issue
equity (Rs crore)
|
|
in Upper price band
|
10.38
|
in Lower Price Band
|
10.42
|
Post-issue
promoter (including promoter group) stake (%)
|
46.42
|
Minimum
Bid (in nos.)
|
25
|
Issue
Open Date
|
14-12-2021
|
Issue
Close Date
|
16-12-2021
|
Listing
|
BSE,
NSE
|
Rating
|
48/100
|
Data
Patterns (India) : Financials
|
|
|
1903
(12)
|
2003
(12)
|
2103
(12)
|
2109
(6)
|
|
Sales
|
131.06
|
156.10
|
223.95
|
96.45
|
|
OPM (%)
|
19.5
|
27.6
|
41.1
|
39.2
|
|
OP
|
25.55
|
43.16
|
91.99
|
37.82
|
|
Other
income
|
1.45
|
4.09
|
2.60
|
0.73
|
|
PBIDT
|
26.99
|
47.25
|
94.59
|
38.55
|
|
Interest
|
10.78
|
13.34
|
14.50
|
4.81
|
|
PBDT
|
16.22
|
33.91
|
80.09
|
33.73
|
|
Depreciation
|
5.86
|
5.48
|
5.55
|
2.96
|
|
PBT
|
10.36
|
28.43
|
74.53
|
30.78
|
|
EO Exp
|
0.00
|
0.00
|
0.00
|
0.00
|
|
PBT
after EO
|
10.36
|
28.43
|
74.53
|
30.78
|
|
Tax
|
2.58
|
7.38
|
18.96
|
7.57
|
|
PAT
|
7.78
|
21.05
|
55.57
|
23.21
|
|
PPT
|
0.08
|
0.00
|
0.00
|
0.00
|
|
Net
profit
|
7.70
|
21.05
|
55.57
|
23.21
|
|
EPS
(Rs)*
|
1.5
|
4.1
|
10.7
|
8.9
|
|
EPS
(Rs)**
|
1.5
|
4.0
|
10.7
|
8.9
|
|
** on
post issue equity of Rs 10.38 crore. Face Value: Rs 2
|
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
|
|
|
|
|