When defence and space products and solutions provider Paras Defence and Space Technologies makes its debut on the bourses on October 1, it is expected to start trading at more than 100 percent premium, analysts believe.
The healthy premium is largely attributed to its strong initial public offering (IPO) subscription, the government's push for 'Atmanirbhar Bharat' and 'Make-in-India' initiatives, variety of product offerings in several defence segments, and strong research and development capabilities.
"Considering the record-breaking demand from QIBs & HNIs, one can expect a bumper listing around the Rs 360-400 levels, which translates into more than 100 percent premium over the upper end of the IPO price at Rs 175," said Prashanth Tapse, VP, Research, Mehta Equities.
Gaurav Garg, Head of Research, CapitalVia Global Research, and Astha Jain, Senior Research Analyst, Hem Securities, also agree that the share will start trading at a premium of more than 100 percent.
Big investor response
The IPO received an overwhelming response from all categories of investors, getting oversubscription of 304.26 times, during September 21-23. The offer received bids for 217.26 crore equity shares, against the IPO size of 71.40 lakh shares, garnering bids worth more than Rs 38,000 crore.
Qualified Institutional Buyers (QIBs) had put in bids 169.65 times the portion set aside for them, and the reserved portion of non-institutional investors was subscribed 927.70 times. Retail investors bought 112.81 times the portion reserved for them.
"The bumper listing gains seem to be justified as Paras stands well as a dominant player, catering to the space and defence sectors. It will also get huge benefits from the central government's flagship programmes like ‘Atmanirbhar Bharat' and 'Make-in-India' initiatives, with a huge export growth potential and the issue was fairly priced to new investors," Tapse explained.
Paras Defence was a small issue, raising Rs 170.77 crore from its offer that comprised a fresh issue of Rs 140.6 crore and the remaining Rs 30.2 crore was an offer for sale (OFS). The company will deploy the issue proceeds for buying machinery and equipment, incremental working capital requirements, and for repaying certain borrowings.
Also read: Paras Defence IPO share allotment finalised
The company, being one of the few players in high-precision optics manufacturing for space and defence applications in India, has strong R&D capabilities with a focus on innovation. It has a strong order book of Rs 305 crore, which gives good revenue visibility, going forward, experts feel.
Grey market premium
Paras Defence shares were available at Rs 405-410 in the grey market, which is a sharply higher premium of Rs 230-235, or 131-134 percent, over the final issue price of Rs 175, IPO Watch and IPO Central data showed.
The grey market is an unofficial platform for trading in IPO shares. The grey market trading in IPO shares start from the announcement of the price band till the listing of shares.
"Currently, Paras Defence shares are trading at a premium of Rs 225 in the grey market, which is a listing gain of around 135 percent. This indicates a price of Rs 400. In my opinion, it might stretch to Rs 450," said Garg.
Paras Defence, promoted by Sharad Virji Shah and Munjal Sharad Shah, and backed by ace investor Sunil Singhania-owned Abakkus Emerging Opportunities Fund 1, is one of the private companies in the indigenously designed, developed and manufactured category that caters to four major segments of India’s defence sector – defence and space optics, defence electronics, electro-magnetic pulse protection solutions and heavy engineering.
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