The IPO market is in the news a lot this year with many IPOs of not only big companies but also from the MSME sector entering the markets. The most recent IPO is of DCX Systems Limited which is a mix of fresh issue and Offer of Sale. This IPO subscription was open from 31st October 2022 to 2nd November 2022. After allotment on 7th November, the company’s shares will be listed on the stock exchange on 11th November 2022.
The IPO was subscribed 69.79 times on the last day of IPO subscription.
Details of this IPO and other relevant details of the company are mentioned below.
Read More: Top Defence stocks in India
Category Details IPO Opening Date 31st October 2022 IPO Closing Date 2nd November 2022 Listing NSE, BSE Issue Type Book Built Issue IPO Face Value of Shares Rs 2 per share IPO Price Band Rs 197 – Rs 207 per share IPO Size Rs 500 crores
The DCX Systems Limited IPO will be open for a brief period following which the allotment process and listing process will begin. The important dates of the IPO and listing are tabled below.
Event Date Price Band Allotment 21st October 2022 Anchor Investors Allotment 30th October 2022 Opening date 31st October 2022 Closing Date 2nd November 2022 Allotment date 7th November 2022 Refund Date 9th November 2022 Share Credit Date 10th November 2022 Listing Date 11th November 2022
IPO Lot Size
Like every IPO, investors willing to invest in DCX Systems Limited will have to purchase shares in lots of the predetermined sizes. Therefore the subscription to fractional shares is not permitted. The details of the lot sizes and the minimum amount of investment for retail investors is tabled below.
Category Details Minimum investment 1 lot Shares in each lot 72 shares Minimum amount of investment per lot Rs. 14,904 Maximum permissible investment in Lots 13 lots Maximum shares for investment 936 shares Maximum amount of investment permissible Rs. 1,93,752
The three categories of investors eligible for investing in DCX Systems Limited and the share reserved for each category are tabled below.
Category of Investor Reservation of the IPO applicable Maximum shares for subscription Amount of investment QIB (Qualified Institutional Buyers) 75% 18,115,952 Rs.375 crores NII (Non-Institutional Bidders) 15% 36,23,188 Rs.75 crores RII (Retail Individual Investors) 10% 24,15,549 Rs.50 crores
DCX Systems Limited IPO Objective
The objects of the IPO state that the net proceeds from the IPO will be used for the following purposes,
- Repayment or prepayment, in part or in full, of certain borrowings that have been availed by the company.
- Meeting the working capital requirements of the company
- The proceeds will also be used to fund the capital expenditure of its investment in the wholly owned subsidiary Raneal Advanced Systems Private Limited.
- The IPO proceeds will also be used to meet the expenses of general corporate purposes.
About DCX Systems Limited
DCX Systems Limited, formerly known as DCX Cables Assemblies Private Limited, is in the business of manufacturing electronic sub-systems and cable harnesses. It is engaged in system integration as well as manufacturing a comprehensive array of cables, wire harnesses, and kitting. Furthermore, the company also supplies assembly-ready kits that are used for electronic and electromagnetic parts. The company is also a preferred Indian partner for Foreign OEMs in contracts for the execution of aerospace and defence-related manufacturing projects. The company’s financial future is quite optimistic on account of growing FDI in the defence sector as well as approximately 26 customers in countries across the world like Isreal, the United States, Korea, and India which are private companies and public sector companies and startups. The defence industry in the country is expected to grow up to US$70 billion which provides significant growth opportunities for the company. The company saw an increase in its orderbook from Rs.2369 crores to Rs.2563 crores as of June 2022.
Financials of the company
The core financials of the company are tabled below.
|Year||Total Assets (Rs. In crores)||Operating Revenue (Rs. In crores)||Profit after tax (Rs. In crores)||Basic EPS||Diluted EPS||RONW|
Strengths of the company
Some of the key strengths that make an investment in this company an attractive option is,
- As mentioned above, DCX Systems Limited is a preferred Indian partner for the foreign defence and aerospace industry and has global accreditations.
- The business is technology abled and can be further scaled to meet the growing demand for its products.
- This business has enough visibility of cash flows and has the ability to mitigate its operational and technology risks.
- An additional benefit for the business is its location as it is strategically located in the Aerospace SEZ (Special Aerospace Economic Zone) that is equipped with advanced manufacturing facilities.
- The company has a very capable senior management team as well as experienced and qualified promoters that can help it achieve its objectives.
Risks of investment
- A heavy concentration of customers The major chunk of business of the company comes from three main customers. This concentration of revenues can pose a survival risk if any of the company is no longer a client pr of the demand for the company’s products decreases.
- Availability of raw materials The disruption of the supply chain is a serious concern as the business depends on raw materials for production and meet its contractual obligations. Any delay or disruption in production due to irregular or lack of supply of necessary raw materials can have an adverse impact on the company’s financials.
- Liquidity concerns DCX Systems Limited has a high level of working capital requirement and being on the heavier side of the debt-equity ratio, generating timely finances may prove to be difficult for the company.
- Currency fluctuations The revenues generated from the offshore clients as well as the amount paid to foreign clients for inputs are subject to currency fluctuations. This may lead to a loss of revenues or an increase in the cost of production, both of which are not good news for the bottom line of the company.
What is the Grey Market Premium (GMP) on DCX Systems Shares?
As of 02 Nov, the grey market premium for the shares of DCX Systems is Rs 82 as per market observers.
Should you apply for DCX Systems Limited IPO?
Now comes the golden question, is it a good bet for investors? The company has seen a growth in its revenue of 56% CAGR as well as a significant increase in net profits (160% CAGR between FY 20 and FY 22). The company also has a high RONW (Return on Net Worth) which is better than its peers but also a high debt-equity ratio of 4.27. One of the prime advantages for the company is its dominance in its segment and a corresponding increase in its profit margins. Therefore, DCX Systems IPO is a good investment opportunity for investors looking for listing benefits as well as aiming for a good addition as a long-term investment.
How to apply for DCX Systems Limited IPO?
Investors can invest in this IPO through the Fisdom app.
A. The price band for DCX Systems Limited IPO is Rs. 197 to Rs. 207.
A. No. The IPO is a combination of a fresh issue ((approximately Rs. 400 crores) and an offer for sale (approximately Rs. 100 crores).
A. Retail investors can bid a maximum of 13 lots in this IPO.
A. The lead managers of DCX Systems Limited IPO are Edelweiss Financial Services Limited, Axis Capital Limited, and Saffron Capital Advisors Private Limited.
A. The DCX Systems IPO is of Rs.500 crores