What is the rationale for investing in DCX Systems’ IPO of 500 crores that opens today?

It has been announced that DCX Systems is holding its Initial Public Offering (IPO) today, on Monday, November 31st. In order to participate in this IPO, investors must place their bid by Wednesday, November 2.

Analysts are optimistic about this IPO. In his opinion, the company is a preferred Indian offset partner in the defense and aerospace sectors. It also has a strong order book, suggesting that its revenues will continue to grow. The valuation of the company is also quite attractive compared to competing firms.

‘Subscribe’ is the recommendation of Angel One

As Purvis Chowdhury, an analyst at Angel One, an investment brokerage, noted, “DCX Systems has experienced significant revenue growth and profit growth over its peers in the past two years (CAGR 57% and 159%, respectively), higher returns on equity, and strong orders. Throughout the next two years, books (Rs 2,564 crore) will provide growth opportunities.”

The valuation of this IPO is reasonable, and he recommends investors subscribe to it. After listing on the stock exchange, DCX Systems’ P/E is based on its FY 2022 earnings. The company owns 30.5 times the share of the market, which is lower than its peers, such as Paras Defense & Space Technologies, Data Patterns India, and Sundram Fasteners.

A $500 million IPO is planned by DCX Systems

A Rs 500 crore IPO is planned by the company. As part of the restructuring, the company will issue a fresh issue of Rs 400 crore, while the remaining Rs 100 crore will be the subject of an offer-for-sale (OFS), which will allow some of its shareholders to sell their shares.

It is intended that the company will use Rs 110 crore from the sale of fresh shares to repay its debts, Rs 160 crore to meet its working capital requirements, and Rs 44.9 crore to invest in its subsidiary Raneal Advanced Systems and for other general corporate purposes

Will DCX Systems’ IPO require a large investment?

DCX Systems IPO price band is Rs 197 to Rs 207 per share. There are 72 shares in each lot, which means retail investors must invest at least Rs 14,904 if the price band’s upper end is Rs 14,904.

Anchor investors contribute 225 crores to DCX Systems

A private placement by DCX Systems on October 28 raised Rs 225 crore from anchor investors before today’s public listing. Twelve anchor investors have been allocated 1,08,69,564 equity shares of the company at a price range of Rs 207. These include BNP Paribas, Volrado Ventures, Thelimi, HDFC Large & Midcap, Motilal Oswal MF, Quantum, Resonance, and Coation, among others.

Choice Broking’s advice on this matter?

IPO of DCX Systems has also been recommended by Rajnath Yadav of Choice Broking. In addition to its consistent financial performance, technology-led capabilities, experienced and qualified promoters, and strong cash flow, this IPO has several positive characteristics.

GMP for DCX Systems’ IPO

Despite the gray market, DCX Systems is getting a positive response to its IPO. A gray market premium (GMP) of roughly 20 percent was recorded on Monday, indicating a positive reaction from investors and a higher level of subscriptions for the IPO. It is, however, not recommended to invest solely based on signals obtained from the gray market. As an alternative, the company’s fundamentals and financial performance should be considered in making a decision.

Company information

Assemblies of cables and wire harnesses are manufactured by DCX Systems, a Bangalore-based company. Financially speaking, the company has grown its operational revenue at a CAGR of 56.64 percent from Rs 449 crore in FY20 to Rs 1,102 crore in FY22. It is also noteworthy that the company’s order book increased from Rs 1941 crore to Rs 2369 crore during this period.

The views and investment advice provided here reflect the personal opinions and views of investment experts. Prior to making any investment decision, StockPro advises its users to consult a certified expert.

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