2,790 Per Cent Returns: Multibagger Defence Stock; Issuance Of Debentures By Subsidiary Company And Corporate Guarantee By The Company

The stock gave multibagger returns of 940 per cent in just 3 years and a whopping 2,790 per cent in 5 years

On Friday, shares of Apollo Micro Systems Ltd gained 8.60 per cent to an intraday high of Rs 128.05 per share from its previous closing of Rs 117.95 per share. The stock’s 52-week high is Rs 157 per share and its 52-week low is Rs 88.10 per share. The shares of the company saw a spurt in volume by more than 1.5 times on BSE.

Regarding the issuance of debentures by Apollo Defence Industries Private Limited, a subsidiary of Apollo Micro Systems Limited. The subsidiary has approved the issuance of Unlisted, Secured, Redeemable Non-Convertible Debentures, aggregating to Rs 50 crore, on a preferential basis through private placement. These debentures will be issued to institutional investors/financial institutions for a tenure of three years, with the proceeds earmarked for expanding business operations through entity acquisitions.

To support this fund-raising initiative by its subsidiary, Apollo Micro Systems Limited has approved the extension of a Corporate Guarantee of Rs 50 crore in favour of the debenture holders. This guarantee is provided to secure the issuance of the debentures. Mr. Baddam Karunakar Reddy and Mr. Addepalli Krishna Sai Kumar, promoters of Apollo Micro Systems Limited, also hold 14 per cent and 10 per cent shareholding, respectively, in the subsidiary, thus having an interest in this transaction. However, the transaction is conducted on an arm’s length basis. The corporate guarantee, a contingent liability, is valid until the full redemption of the debentures and is provided without additional consideration, aimed at strengthening the subsidiary’s credit profile.

The corporate guarantee, while creating a contingent liability, does not impose an immediate financial liability on Apollo Micro Systems Limited. It is intended to bolster the subsidiary's creditworthiness and facilitate the successful issuance of the debentures. The guarantee is extended on specific terms, ensuring it remains valid until the complete redemption of the debentures, with no additional consideration involved beyond the subsidiary’s obligations. This strategic move aims to support the subsidiary's expansion plans, ultimately contributing to the overall growth and stability of the group.

About the Company

Established in 1985, Apollo Micro Systems is at the forefront of creating, constructing, and validating crucial electronics and electromechanical solutions for sectors such as aerospace, defence, and space. The company is renowned for its commitment to research and development, resulting in notable projects such as torpedo-homing systems and underwater mines. =

According to Quarterly Results, net sales increased by 62.5 per cent to Rs 148.39 crore and profit after tax (PAT) increased by 83.1 per cent to Rs 18.24 crore in Q3FY25 compared to Q3FY24 while in its nine-month results, the net sales increased by 69.5 per cent to Rs 400.30 crore and profit after tax (PAT) increased by 133.2 per cent to Rs 42.40 crore in 9MFY25 compared to 9MFY24. In its annual results, the net sales increased by 24.91 per cent to Rs 371.63 crore and profit after tax (PAT) increased by 66.01 per cent to Rs 31.11 crore in FY24 compared to FY23.

The company falls under the BSE Small-Cap Index with a market cap of over Rs 3,800 crore. In December 2024, FIIs increased their stake in AMS to 0.74 per cent from 0.19 per cent in September 2024. The stock gave multibagger returns of 940 per cent in just 3 years and a whopping 2,790 per cent in 5 years. Investors should keep an eye on this aerospace & defence stock.

Disclaimer: The article is for informational purposes only and not investment advice.