DCX Systems IPO: Over half of the issue subscribed so far; here’s everything you need to know

The Rs 500 crore DCX Systems IPO will be available for subscription till Wednesday, November 2, 2022, and the price band of the company has been fixed at Rs 197-207 per share.

The offer comprises a fresh issue of equity shares worth Rs 400 crore and an offer for sale (OFS) of equity shares up to Rs 100 crore by promoters NCBG Holdings Inc and VNG Technology.

The net proceeds from the fresh issue will be used for repayment/prepayment of certain borrowings, funding working capital requirements, investment in wholly owned subsidiary, Raneal Advanced Systems Private Limited, to fund its capital expenditure expenses and for general corporate purposes, according to the information given in the red herring prospectus (RHP).

Three-forth of the issue size has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 10 per cent for retail investors.

DCX Systems is a Bengaluru-based company that is engaged in manufacturing of electronic sub-systems and cable harnesses in the defence and aerospace sector. It commenced operations in 2011 and has been a preferred Indian Offset Partner for foreign original equipment manufacturers for executing aerospace and defence manufacturing projects.

“Over the years, we have expanded our manufacturing capabilities and grown our order book. As of June 30, 2022, we had 26 customers in Israel, United States, Korea and India,” the company said in its RHP.

Investors who wish to subscribe to DCX Systems IPO can bid in a lot of 72 equity shares and multiples thereafter. At the upper price band, they will be shelling out Rs 14,904 to get a single lot of DCX Systems. The shares will be listed on both BSE and NSE.

The applicants also must note that the cut-off time for UPI mandate acceptance is Wednesday, November 2, 2022, upto 5:00 pm, the last day of IPO bidding. If they fail to do so then their application may not be considered.

Edelweiss Financial Services, Axis Capital, Saffron Capital Advisors are the book-running lead managers to the offer while Link Intime India is the registrar of the issue.

Before heading into the IPO, DCX Systems on Friday raised nearly Rs 225 crore (Rs 2,24,99,99,748) from 12 anchor investors in lieu of 1,08,69,564 equity shares at Rs 207 each, data from the stock exchanges showed.

The anchor investors include HDFC Mutual Fund, Motilal Oswal Mutual Fund and BNP Paribas Arbitrage among others.

Commenting on the IPO, Ravi Singh, vice president and head of research at Share India Securities told indianexpress.com, “The growing landscape for Indian defence and aerospace may serve as a key opportunity for DCX Systems. Recent initiatives like an increase in FDI in the Indian defence sector from the current 49 per cent to 74 per cent under the automatic route are anticipated to open new growth opportunities for the industry. The issue price of DCX Systems is also seems to be fairly priced based on their valuations. Investors may subscribe to this IPO from long term perspective.”

Reliance Securities in its IPO note has given a “Subscribe” rating to the offer.

“Based on FY22 earnings, the company is valued at 25.4x EV/EBITDA, 1.5x EV/Sales and 31x P/E, which is below its peers. DCX is poised to grow with several opportunities in the defence and aerospace in the domestic and international market. The defence budget outlay has increased to Rs5,250bn in FY23, from Rs4,780bn in FY22. In the view of healthy order book (Rs25.6bn, 2.3x FY22 revenue), which provides revenue visibility, decent financial performance, being a key beneficiary of the government’s thrust on the defence space and valuation comfort, we recommend ‘SUBSCRIBE’ to the issue,” the brokerage noted.