The initial public offering (IPO) of DCX Systems, an offset partner in the defence and aerospace space, has got a good response, mopping up bids for 5.1 crore equity shares against an offer size of 1.45 crore shares.
The IPO had been subscribed 3.51 times on November 1, the second day of bidding. Retail investors are aggressively bidding for the IPO and have bought 14.15 times their allotted quota of shares.
Non-institutional investors have subscribed 3.89 times their quota, while qualified institutional buyers have bid for 3 percent of the shares set aside for them.
DCX Systems plans to mobilise Rs 500 crore through the IPO, with a price band of Rs 197-207 a share. The offer comprises a fresh issue of Rs 400 crore and an offer for sale of Rs 100 crore.
The company will repay some its borrowings through fresh issue proceeds. Funds will also be utilised to meet its working capital requirements and capital expenditure expenses of subsidiary Raneal Advanced Systems.
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DCX is engaged in system integration and manufacturing a comprehensive array of cables and wire harness assemblies and is also involved in kitting. It undertakes system integration in areas of radar systems, sensors, electronic warfare, missiles, and communication systems.
At the end of June FY23, its order book stood at Rs 2,600 crore, 2.3 times its FY22 revenue, which is to be executed by FY25.
Most analysts have a subscribe rating for the issue, given its strong financials with healthy return ratios, increasing focus and expenses on defence by the government, customer base expansion and reasonable valuations.
DCX clocked a 57 percent CAGR growth in revenue during FY20-FY22 on a low base. In the same period, EBITDA and profit grew at a 228 percent and 160 percent CAGR, respectively.
Given an asset-light model, return ratios are robust with FY22 return on equity at 78.9 percent, Sneha Poddar of Motilal Oswal Financial Services has said.
The company, being preferred Indian offset partner in the defence and aerospace space, is well placed to capture the industry tailwinds, Poddar said.
Motilal Oswal likes DCX' focus on revenue, geography diversification, customer-base expansion and inorganic growth, which could keep the earnings growth strong.
It is valued at 30.5xFY22 P/E, which is reasonable compared to listed peers, it said.
Given the fancy for defence stocks and continuous news flows in that space, the brokerage expects the IPO to do well and investors should subscribe for listing gains, Poddar said.
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