Don’t get swayed away with Paras Defence listing gains, stay invested

Paras Defence & Space Technologies did a record debut of FY22 as it got listed at a strong premium of 171%. Shares of the company opened for trading at Rs 469 on the National Stock Exchange, compared to the issue price of Rs 175, marking a premium of 168%. On the BSE, Paras Defence opened at Rs 475. In the afternoon session, the share was quoting at its all-time high of Rs 498.75. On an intraday basis, it hit a low of Rs 456, on the BSE.

With such strong listing gain, investors are tempted to book listing gains but brokerages think otherwise.

“Eyeing the government’s focus on the Space and Defense sector, it is expected that both the segments of the Paras Defence are likely to be benefited. The “Make in India” campaign by the government to be self-reliant by 2027 will give a boost to the industry. In the long term, the company may benefit from the initiatives by the government and is expected to perform well. The company has a strong order book and the IPO is priced at PE of 31x. Aggressive investors can remain invested in the company for the long term after a massive listing,” advised Santosh Meena, Head of Research, Swastika Investmart.

Likewise, Hemang Jani, Head – Equity Strategy, Broking & Distribution at Motilal Oswal Financial is positive on Paras Defence given its complex/wide product portfolio, presence in niche defence/space, strong client relationship and high entry barriers. Given the huge impetus on the defence by the government, the stock presents good opportunity for investors to participate in this niche space.

“Although there are no listed entities in India whose business portfolio is comparable with that of Paras Defence business, still the valuations on an absolute basis do not provide fresh investing comfort in the near term. However, considering the company’s wide range of products and solutions offering to defence and space applications and its positioning to benefit from Government’s “Atmanirbhar Bharat” and “Make in India” initiatives, the long-term growth story of the company remains intact,” explained Saurabh Joshi, Research Analyst at Marwadi Shares and Finance.

The Rs 171 crore issue of Paras Defence and Space Technologies IPO created history as it was the most subscribed IPO. IPO saw an overwhelming response from all the categories of investors. It received bids of 2,17,26,31,875 shares against the offered 71,40,793 equity shares, as per data available on the bourses. The issue was subscribed 304.26 times making it the most subscribed IPO in history. The portion reserved for the non-institutional investor category was subscribed 927.70 times and the retail investors were subscribed 112.81 times, while the qualified institutional buyer category was subscribed 169.65 times.

Paras Defence and Space Technologies’ business is highly dependent on projects and programmes that are undertaken by the central government and associated entities, such as defence public sector undertakings and government organisations involved in space research. Anand Rathi Advisors was the manager of the offer.