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The initial public offering (IPO) Data Patterns (India) Limited opened for subscription on Monday and investors will be able to bid for the company’s shares till December 16.

The IPO of the defence and aerospace electronics solutions provider got off to a flying start today as it has already been subscribed 1.42 times as of 12 pm. It has seen particularly high demand from retail investors on the first day, besides healthy demand in the HNI category. The portion reserved for qualified institutional buyers is yet to see any subscriptions.

The company has also managed to raise Rs 176 crore from anchor investors ahead of today’s IPO launch. It allotted 30.16 lakh shares to anchor investors at Rs 585 apiece, according to data on the Bombay Stock Exchange (BSE) website.

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GMP, LISTING DATE & KEY DETAILS

The price band of the Rs 588.22 crore IPO has been set at Rs 555-585 apiece. Individuals will be able to bid for a minimum of 25 shares under one lot for Rs 14,625 and a maximum of 13 lots (325 shares) for Rs 1,90,125.

At least 50 per cent of the IPO has been reserved for QIBs, 35 per cent for retail investors and 15 per cent for HNI category. The IPO is likely to be listed on December 24 after final share allotment on December 21.

The IPO comprises a fresh issuance of Rs 240 crore and an offer for sale (OFS) of Rs 348.22 crore.

The grey market premium (GMP) of the Data Patterns IPO was Rs 580 or 99.15 per cent over the issue price of Rs 585. Though the GMP is likely to change as the IPO heads towards the listing date, it does suggest that a strong listing is on the cards.

The company plans to use the proceeds of the IPO for repayment of certain outstanding borrowings, funding working capital requirements, upgrading and expanding its existing facilities in Chennai and general corporate purposes.

SHOULD YOU SUBSCRIBE?

A number of brokerages have given a subscribe rating to the Data Patterns IPO, given the future of the defence sector in the country. The transformation of the Indian defence sector will offer ample opportunities to defence-oriented firms like Data Patterns as they will benefit from favourable policies.

Simply put, brokerages believe that the company has a long-term potential to grow and deliver profits.

In an IPO note, brokerage Swastika said, “In the last 3 years, the company has shown strong growth in revenue where it grew at a CAGR of 19 per cent from Rs 132.50 crore to Rs 226.55 crore over the period of FY19 to FY21, during the same period profit has grown at a CAGR of 97 per cent from Rs 7.70 crore in FY19 to Rs 54.6 crore in FY21.”

“Data Patterns increased its net profitability by approximately 158 per cent between FY20 and FY21. We believe that the company has enormous potential to grow rapidly thanks to the government’s focus on Defense and Aerospace. The IPO is priced at a 49x PE and 13x P/BV to its FY21 earnings at an upper price band of Rs 585.”

“Attractiveness in the defense sector is likely to boost sentiment for the IPO. Thus we recommend a ‘subscribe’ rating to the IPO for listing gain and long term,” it added. Brokerages Angel One, Yes Securities and a few others also gave a ‘subscribe’ rating to the stock.

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India today

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