IPO Analysis: Data Patterns (India) Ltd
IPO Rating: Invest for long-term
About the issue:
Data Patterns is engaged in providing solutions primarily to the defence industry. The maiden offer comprises of fresh issue of Rs 240 crore and an offer for the sale of shares worth Rs 348.22 crore by existing investors, according to its red herring prospectus. The price band of the issue has been fixed at Rs 555 to Rs 585 per equity share. The IPO opening date is December 14, 2021, while it will be closing on December 16, 2021. The issue will be listed on the exchange on December 24, 2021. The IPO market lot size is 25 shares. A retail-individual investor can apply up to a maximum of 13 lots (325 shares or Rs 190,125).
The objects of the offer are:
Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company.
Funding working capital requirements of the company.
Upgrading and expanding the company’s existing facilities in Chennai.
Meet general corporate purposes.
Data Patterns IPO Details:
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IPO Opening Date
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Dec 14, 2021
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IPO Closing Date
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Dec 16, 2021
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Issue Type
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Book Built Issue IPO
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Face Value
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₹2 per equity share
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IPO Price
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₹555 to ₹585 per equity share
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Market Lot
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25 Shares
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Min Order Quantity
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25 Shares
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Listing At
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BSE, NSE
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Issue Size
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[.] Eq Shares of ₹2
(aggregating up to ₹588.22 Cr)
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Fresh Issue
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[.] Eq Shares of ₹2
(aggregating up to ₹240.00 Cr)
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Offer for Sale
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5,952,550 Eq Shares of ₹2
(aggregating up to ₹348.22 Cr)
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QIB Shares Offered
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Not more than 50% of the offer
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Retail Shares Offered
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Not less than 35% of the offer
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NII (HNI) Shares Offered
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Not less than 15% of the offer
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About the company:
Incorporated in 1985, Data Patterns is a defence and aerospace electronics solutions provider catering to the indigenously developed defence products industry. The company offers products to the entire spectrum of defence and aerospace platforms - space, air, land, and sea. The company's core competencies include electronic hardware design and development, software design and development, firmware design and development, mechanical design and development, product prototype design and development, functional testing and validation, environment testing and verification, and engineering services opportunities.
The company's manufacturing facility consists of a 100,000 square feet factory built on 5.75 acres of land in Chennai, which has facilities for design, manufacturing, qualification, and life cycle support of high-reliability electronic systems used in defence and aerospace applications. The company is also planning to acquire an additional 2.81 acres of adjacent land for further expansion. As of July 31, 2021, Data Patterns had 760 employees with more than 450 qualified engineers.
Competitive Strengths:
Strategic defence and aerospace electronics solutions provider, well-positioned to benefit from the Make in India opportunity.
Innovation focussed business model.
Sound order book with orders from several prestigious customers in the Indian defence ecosystem.
The modern certified manufacturing facility of international standards.
Track record of profitable growth.
Experienced management team and skilled workforce.
Company Financials:
With an order book of Rs 5,822.97 million as of July 31, 2021, which has increased from Rs 1,786.98 million as of April 1, 2018, to Rs 4,979.87 million as of March 31, 2021, at a CAGR of 40.72 per cent, indicating a highly scalable business model. The EBITDA margin stood at 41.75 per cent in FY21 and the PAT margin was at 24.53 per cent.
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Particulars
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For the year/period ended (₹ in Millions)
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30-Sep-21
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31-Mar-21
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31-Mar-20
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31-Mar-19
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Total Assets
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3,558.00
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3,283.71
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2,953.63
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2,774.27
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Total Revenue
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971.72
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2,265.50
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1,601.92
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1,325.09
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Profit After Tax
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232.09
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555.71
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210.48
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77.02
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Recommendation:
The defence electronics market at present is evaluated to be worth approximately Rs 141 billion in 2021 and is expected to grow to approximately Rs 524 billion in 2030 with a cumulative market opportunity for this segment in the order of approximately Rs 3.3 trillion and a CAGR of 15.71 per cent during the period.
The Indian defence industry is rapidly evolving into a self-sustaining one with companies and DPSUs moving towards specializing in defence primes, integrators and component suppliers. With DPSUs focussing on specialization and integration and subcomponent manufacturing being outsourced to the private industry, there are resultant expanded opportunities for the private sector according to F&S Report.
The order book of the company includes orders from several marquee customers in the Indian defence ecosystem, including the Indian government defence ministry, BrahMos, DRDO, the Indian government space organisation, HAL, BEL and a DPSU involved in the missile space. The financials of the company appear strong and have witnessed strong momentum in the past couple of years. With net profitability growth of approximately 164 per cent between Fiscal 2020 and Fiscal 2021, it is one of the fastest-growing companies in the Defence and Aerospace Electronics sector in India with excellent margins and return ratio. The ROE and ROCE stood at 26.75 per cent and 34.69 per cent respectively. We recommend our readers to invest in the IPO for the long-term.