Can you tell me more about the Paras Defence IPO that is expected to hit the markets shortly?

Defence is a big business to tap now in India and more and more such defence support companies are looking to raise funds via IPOs. We saw a tremendous response to the MTAR IPO, which is also into supporting the defence and space research establishments in India. Now, another defence related company, Paras Defence and Space Technologies has filed preliminary papers with SEBI for its proposed IPO in the Indian markets.

While the full details of the IPO with the price band will be announced in due course, what is known is that the proposed IPO will comprise of a fresh issue worth Rs.120 crore. In addition, there will also be an offer for sale wherein 17.245 lakh shares will be offered to the potential IPO investors at the discovered price. Some of the early investors including the promoters will be partially monetizing their stake in the forthcoming IPO.

To better establish its institutional credentials, Paras Defence is also planning a pre-IPO placement of close to Rs.35 crore ahead of the IPO. Normally, this pre-IPO placement is critical as it sets a veritable benchmark for pricing the issue and also to gauge the appetite for the stock among the domestic and the global financial institutions. The pre-IPO price normally becomes the guide for actual pricing.

In terms of the business model, Paras specializes in design, development, manufacture and testing of a range of defence and space engineering products and solutions. It largely relies on orders and projects from the defence establishment in India and also from various government sponsored organizations in defence and space research. Paras proposes to use the fresh issue component to fund its proposed capital expenditure and to repay loans.