The three-day initial public offering (IPO) of cables and harness assemblies manufacturer DCX Systems opens for public subscription today. The first share sale, consisting of a new share issue worth Rs 400 crore and an Offer for Sale (OFS) of up to Rs 100 crore by existing shareholders, will be available for bidding during three trading days ending November 2.
DCX Systems IPO: Price Range
The price range for DCX Systems’ IPO has been set at Rs 197-207 per share. At least 75 percent of the IPO is reserved for qualified institutional investors, up to 15 percent for high net worth individuals and 10 percent for retail investors.
DCX Systems IPO: Problem Size
The IPO consists of the issuance of new shares worth Rs 400 with a par value of Rs 2 each. Existing promoters and shareholders will sell shares worth Rs 100 crore through an offer for sale (OFS).
DCX Systems IPO: Lot Size
Investors can subscribe to the DCX Systems IPO by betting on a lot of 72 shares or a multiple thereof. In the upper range of the price range, one lot of the IPO is worth Rs 14,904. A private bidder can bid up to 13 lots or 936 shares.
DCX Systems IPO: Participating Shareholders
NCBG Holdings and VNG Technology are the promoters of the company. The entities will redeem their interest through the for sale. After the issuance, the promoter’s share will fall 24.61 percent to 73.58 percent from the current 98.19 percent stake they hold in the company.
DCX Systems IPO: Objective
The company proposes to use the net proceeds from the new issue to pay debt, finance working capital requirements, invest in its wholly owned subsidiary Raneal Advanced Systems to fund its capital expenditures and general corporate purposes.
DCX raised Rs 225 crore through its anchor book on October 28, ahead of the opening of the public issuance. A total of 12 investors participated in the anchor book and the company completed the allotment of 1.08 crore shares to anchor investors at a price of Rs 207 per share, which is the top end of the price band.
Investors including Volrado Venture Partners Fund, Cohesion MK Best Ideas, Quantum State Investment Fund, India SME Investments, Theleme India Master Fund, Resonance Opportunities Fund, Vikasa India EIF I Fund and BNP Paribas Arbitrage have invested in the company through anchor book.
DCX Systems IPO: GMP Today
The company’s shares are currently at a premium of Rs 65-80 per share in the gray market, according to IPO Watch and IPO Central, both of which track the movements of the gray market.
Edelweiss Financial Services, Axis Capital and Saffron Capital Advisors are the book-running lead managers on the matter. Link Intime India Private Ltd is the registrar of the share sale.
DCX Systems IPO: Finance
DCX reported robust growth in business and profitability over FY19-22. Driven by an increase in the systems integration business, revenue and PAT achieved CAGR of 57 percent and 159 percent, respectively, while EBITDA margin increased from 1.4 percent in FY20 to 6.1 percent in FY22.
DCX Systems IPO: What Should Investors Do?
“At a higher price point, DCX demands an EV/Sales multiple of 1.2x, which is lower than the peer average. Given the favorable macros for the defense industry and for the company, we think the IPO is attractively priced. That’s why we’re assigning a “SUBSCRIBE” rating to the issue,” Choice Broking said.
The Bengaluru-based company is mainly engaged in system integration and the production of a comprehensive range of cables and harness assemblies, and is also involved in kitting.
“As far as valuations are concerned, the post-issue P/E appears to be low compared to its competitors such as Paras Defense & Space Technologies Ltd, Data Patterns (India) ltd and Sundram Fasteners Ltd. Furthermore, DSL has better revenue/PAT growth (CAGR of 57 percent/159 percent respectively) over 2 years, healthy return on equity and the company also has a strong order book that provides visibility for the next 2 years. Given all the positive factors, we believe that this valuation is at a reasonable level. That’s why we recommend a SUBSCRIBE review for this issue,” said Angel One.
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