Data Patterns IPO Review: Valuations, GMP, Issue Size, Financials

It is the only company in India military aircraft design and electronics that makes it unique. The finances are looking very strong and comparing them with peers, they have outperformed not only on the EBITDA margin front but also on the other parameters like ROE and ROCs.

For the FY21, they posted margins of around 25%, which is really very commendable and not only that, the ROEs are around 27%, and ROCs are 35%.

The September 2022 order book is almost twice the revenues they earned in FY21. This offers strong revenue visibility over the next three years. The company will be an important participant in the Rs 1,500 crore worth of contracts to be awarded over the next several years. We have to wait for the pricing for these orders before we can make a decision about this company as an investment opportunity.

Many defence-sector companies trade at a high valuation because their growth potential is often overlooked by investors. Look first at the existing order book and the contracts that will be awarded to these companies in the future. Companies like Paras Defense and MTAR Technologies trade at a PE multiple of over 100 times—this shows how much potential this sector has, and how lucrative it is for investors.

Data Patterns IPO Review: Key Points

• The public issue consists of a fresh issue of shares worth ₹240 crores and an OFS of 59.52 lakh equity shares by promoters and individual selling shareholders.
• Proceeds from the new shares will be used for paying off existing debt, funding the company’s working capital, and for upgrading and expanding its existing facilities as well as for other general purposes.
• Founded in 1977 by the Rangarajan family and based in Bangalore, Data Patterns is a vertically integrated defence and aerospace electronics solutions provider that caters to requirements across space, air, land and the sea.
• Company IPO objects contain Rs 348 Crores towards Offer for sale (OFS). OFS is a process where the money would go to selling shareholders and the company will not get anything in return.

Data Patterns IPO details and Price

• IPO Opening Date: 14-Dec-21
• IPO Closing: Date 16-Dec-21
• Issue Type: Book Built Issue IPO
• Face Value: Rs 2 per equity share
• IPO Price band Rs 555 to Rs 585 per equity share
• Lot Size :25 Shares
• Min Lot Size: 25 Shares
• Listing at BSE and NSE
• Total Issue Size: 588.22 Crores
• Fresh issue:    240 Crores
• OFS size: 348.22 Crores

Data Pattern IPO: Key Risks

• An adverse change in the Indian government’s defence or space policies; a reduction in orders, a cancellation of existing contracts, or delay of contracts or programs
• A significant reduction in business from any of our major customers could result in a loss of business for us.
• We develop and manufacture advanced technology products and solutions applied by our customers in a diverse range of industries. Problems and delays in development or delivery could prevent us from achieving contractual requirements.
• The company’s business is largely dependent on contracts from the government of India and its public sector agencies. Any decline, reduction in orders or termination of existing contracts can affect business.
• The company’s revenue is reliant on a small group of customers, including the government and defense organizations such as DRDO, the Defense Ministry, BrahMos, Aerospace, and the Indian government space organization. The loss of any of these customers could have a significant impact on the business.

Data Patterns (India) Limited IPO Valuation

If we consider the last 3 years weighted average EPS of Rs 7.72 and the upper price band of Rs 585, P/E is 75x. If we take FY2021 EPS of Rs 11.89 and the upper price band of Rs 585, P/E is 49x. If we take 6 months ended Sep-21 EPS and annualize for FY22, P/E is 59x.

Data Pattern IPO: GMP ( Grey Market Premium)

Ahead of its public issue on December 14, Data Patterns quoted a premium of Rs 250 or 42 per cent at the upper price band in the grey market on Wednesday, according to data from IPO Watch.

Is It Good for Investment/ Should You Invest in Data Pattern IPO?

As the military spending is increasing, the security situation is becoming more complex, the company’s market size will witness good growth in the future.

The company has generated stable revenue growth in the last three-and-a-half years, and its margins have grown by 4 times from the fiscal year 2018 to the fiscal year 2021.

On the basis of the risk-reward analysis, investors can invest in this IPO. If such company shares are available at discounted prices post listing, investors can add some more and invest from a medium to long term perspective.