Paras Defence & Space Technologies Ltd IPO

By Morningstar |  21-09-21 | 

Paras Defence and Space Technologies Limited is coming out with its Initial Public Offer (IPO). Incorporated in June 2009, Paras Defence is one of the leading Indigenously Designed Developed and Manufactured category Indian private sector company engaged in designing, developing, manufacturing and testing of a wide range of defence and space engineering products and solutions.

Issue Details

Summary of Industry

Global defence spending touched $ 1.93 trillion in 2019, which was an increase of 3.6% over such corresponding spending in 2018, and the largest annual growth since 2010. Further, India’s defence budget has grown from $ 46.07 billion for FY 2017 to $ 64.62 billion for FY 2022. The defence optics segment is forecasted to grow from approximately $ 255 million in 2021 to approximately $ 2.1 billion in 2030. Airborne Combat and ISR capability expansion will be a major driver of this segment, along with land forces modernization.

Objects of the Offer

  • Purchase of machinery and equipment: Rs 346.57 million
  • Funding incremental working capital requirements of our Company: Rs 600 million
  • Repayment or prepayment of all or a portion of certain borrowings/outstanding loan facilities availed by our Company: Rs 120 million (Source: RHP)

Paras Defence caters to 5 major segments of Indian defence sector:

  • Defence and Space Optics: High precision optics for defence and space applications such as thermal imaging and space imaging systems.
  • Defence Electronics: Providing a wide array of high-performance computing and electronic systems for defence applications, including sub systems for border defence, missiles, tanks and naval applications.
  • Electro-Magnetic pulse (EMP) protection solution: EMP Racks, EMP filters used for protection of data and power lines within a rack/shelter/room against electro-magnetic pulse or interference.
  • Heavy Engineering: components for rockets and missiles along with mechanical manufacturing support to other verticals.
  • Niche Technologies: identified and partnered with some of the leading technology companies around the world in order to indigenise advanced technologies in the defence and space sectors for catering to the Indian market.

They are currently developing several new products and solutions, such as hyper spectral space camera, ARINC-818 based avionic display and naval periscopes, and multi and hyper spectral cameras for drones and space, UAVs, cubesats and anti-drone systems.

The flagship product of their subsidiaries - Paras Aerospace Pvt Ltd will be a Cloud based NPNT Solution (offered as software-as-a-service) and Indigenous Multispectral Camera for various applications including agriculture; and Paras Anti-drone Technologies aims to be one of the first indigenous anti-drone technology development company in India.

Paras Defence has two manufacturing facilities in Maharashtra, located in Navi Mumbai and Thane. As of June 30, 2021, they employed 341 employees.

(Image Source: Axis Capital)

Key Business Strategies

Expansion of the production capacity

Paras Defence currently has two manufacturing facilities. They are also in the preliminary stages of augmenting their manufacturing facility by expanding its production capacity and installing new equipment from the Net Proceeds and from internal accruals. Their investment in infrastructure will enable them to cater to the growing demand from their customers, enhance their space optics product portfolio and offer flow formed tubes for space applications, which in turn is expected to result in an increase in their profits and revenues.

Strengthen the foothold in India’s expanding market

The company can strengthen their foothold in Indian market by continuing to focus on their competitive strengths and increase their market penetration. They can expand their market share by focusing on increasing their products and solutions portfolio, enhancing their existing capabilities and indigenising advance foreign technologies. Recent initiatives of the Government i.e. “Atmanirbhar Bharat Abhiyan”, the Defence Acquisition Procedure and “Make in India” reflects its focus on ‘self-reliance’ wherein indigenisation and innovation is enabled through processes of ‘Make’, ‘Design and Development’ and ‘Strategic Partnership’.

Continue to focus on R&D

Paras Defence is continuously investing in technology, equipment and skilled employees and using it to improve their customers’ experience. Their focus on innovation and development will be crucial to remaining competitive.

As part of their efforts towards R&D, they have set-up 2 R&D centres at Nerul, Navi Mumbai in Maharashtra and Bengaluru, Karnataka employing 31 engineers and officers, to undertake research, develop and experiment new designs, technologies and equipment. They are also constantly exploring opportunities to collaborate with leading overseas technology companies around the world, which among others benefits allows them to enhance R&D. They also intend to increase their product centric R&D by exploring opportunities in designing, engineering and/or manufacturing products such as multi and hyper spectral cameras for drones and space, UAVs, cubesats and anti-drone systems.

Diversify the products and solutions range, with focus on growth by expansion into opportunistic areas

Paras Defence has exclusively partnered with ISISpace for manufacturing cubesats in India.They have also partnered with other technology companies such as HPS, GmbH for Large Deployable Antennas for space, Invent, GmbH for CFRP structures for space and Kley, France for military winches which will further broaden their product portfolio. Their subsidiary, Paras Aerospace Pvt Ltd aims to offer UAV integration solutions and UAV services for a wide range of applications such as agriculture, power transmission, oil and gas, mining and construction. The flagship product of Paras Aerospace Pvt Ltd will be a Cloud based NPNT Solution (offered as software-as-a-service) and Indigenous Multispectral Camera for various applications including agriculture. Further, their subsidiary, Paras Anti-drone Technologies Pvt Ltd will design sub modules and they will be involved in integrating the solution. Paras Anti-drone Technologies aims to be one of the first indigenous anti-drone technology development company in India and is currently collaborating with leading UAV anti-drone technology firms to further develop its expertise in designing customer-specific modules. Further, Paras Aerospace has entered into partnerships with leading UAV technologists from Israel and Italy.

Increasing the reach in the international market

The company primarily caters to the requirements of the Indian market. Through their extensive experience and proven track record, they are strongly positioned for providing products and solutions to international customers. They will continue to focus on their existing markets in Israel and South Korea and intend to provide their products and solutions to markets in the United States and Europe. They have recently received orders from the United States and United Arab Emirates for manufacturing IR Lens and Electro-Mechanical Masts, respectively. In furtherance of an application made by one of their customer for receiving the DSP-05 license from the Department of State, United States of America to enable the export of certain commodities by them, they have recently received their first optics order from United States of America. Obtaining this license by the customer will further increase their exports to the United States, being the biggest optics market in the world. (Source: Axis Capital)

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