Centum Electronics, an electronics system design and manufacturing company is raising funds through an institutional placement of shares, or QIP, in order to move up the value chain by 'delivering complete solutions' for armed services, sending the stock of the company sharply higher by over 11% on March 11.
The management is raising funds through a Qualified Institutional Placement of shares at a floor price of Rs 1,219.65 per share. The share sale will offer a discount of not more than 5% to the floor price for the issue, said Centum, which is aiming to use the fund raise as a 'growth capital' to support the standalone business.
The ESDM player also said that it now intends to 'delivering complete systems to the armed services', and is executing large projects. "We are actively working on large system-level opportunities in collaboration with our technology partners," a exchange filing said.
The management is 'actively exploring' opportunities in high-value programs in an effort to expand margin and aim for the global market. "This strategy positions our ER&D unit as a competitive and reliable partner for global clients, committed to delivering innovative solutions with optimized costs and enhanced margins," Centum Electronics said.
Centum is betting on India's increasing spend on defence modernisation and make in India focus along with rapid progress in space technology as a key growth driver for the company. The company is projecting India's in the global space economy to rise from 2% in FY24 to 8% by FY33. Centum is expecting substantial orders during Q4FY25 from defense-related projects in India.
"Rising defence budget prioritizes advanced technology systems and next-generation capabilities creating substantial opportunities for electronic manufacturing industry," Centum said. The management had projected that it expects significant revenue contribution from the high-margin 'Build to Spec' business during Q4FY25. The company has significant contracts for satellite-based payloads and electronic warfare applications, and boasts of a strong domestic defense orderbook that has risen from Rs 376 crore in FY23 to Rs 563 crore as of 9MFY25.
The company has design centers in Europe, North America and India which Centum says help in working closely with international customers, as it projects India's Engineering Research and Development (ER&D) sector to contribute as much as 22% to the Global ER&D sourcing market by 2030.
India’s cost advantage and growing skilled talent pool are key drivers for Centum's ambitious ER&D plans, and it projects ER&D export market to rise from $44–45 billion in CY23 to $130–170 billion by CY30.
Centum has a diversified presence in space technology, defence electronics and railway information systems, and the current order book stands at Rs 1,675 crore, as of December 31, 2024.
A key concern for Centum remains its Canadian subsidiary, which has been a drag on its overall performance, and the management has been considering measures to revive Canadian operations, which include shifting some work to India, in order to lower costs.
"...we have been shifting a lot of the work from Canada to India, especially on some of the new contracts that we've won. The majority of the execution has happened from India. It is the older projects and programs where the support is still continuing from Canada, for which we are having some hard discussions with our customers to come to a solution," said Nikhil Mallavarapu, ED, Centum Electronics after the December quarter results.
During the December quarter, Centum's consolidated revenue from operations fell by 6% on-year but increased by around 8% QoQ. The Q3FY25 consolidated EBITDA margins stood at 6.9% and standalone EBITDA margin stood at 11.8%.
"Our margins were impacted mainly due to the losses in the Canadian subsidiary and lower utilization due to delays in new project starts in France," Centum said after its December quarter earnings.
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