The public offering of defence systems integration company DCX Systems has received an enthusiastic response from investors of all kinds, as the government’s increasing focus on defence, decent finances and a healthy order book, reasonable valuations, and a positive equity environment spurred the market.

Investors subscribed for 101.16 crore shares on November 2, the last day of bidding, for a subscription size of 1.45 crore shares, or 70 times the initial public offering (IPO). From day one, retail investors have been in the lead, buying 61.35 times.

Since the first day of the IPO, non-institutional investors have also remained active, subscribed 43.96 times, and qualified institutional investors subscribed 84.32 times.

The electronic subsystems and wiring harness maker aim to raise Rs 500 crore through a public offering that includes a new share issue worth Rs 400 crore and a sale offer of Rs 100 crore.

The price range of the offer is Rs 197-207 per share. This issue was opened on October 31. DCX has become the India offset partner of choice for foreign original equipment manufacturers (OEMs) executing aerospace and defence manufacturing projects.

The company’s order book stood at Rs 2,560 crore as of June 2022, 2.3 times its FY22 revenue. During FY20-FY22, its profit has grown at a CAGR of 159%, while its revenue has grown at a CAGR of 57% during the same period. The operating margin widened from 1.4% in FY20 to 6.1% at the end of FY21-22. In FY22, the domestic market contributed about 44% to the total revenue, with the rest coming from exports.

According to Reliance Securities, based on FY22 earnings, the company is valued at 25.4x EV/EBITDA, 1.5x EV/Sales and 31x P/E, which is lower than its peers, believing that DCX is expected to have several opportunities to grow in the defence and aerospace industry in the both domestic and foreign market.

Defence budget expenditure increased from Rs 4.78 lakh crore in FY22 to Rs 5.25 lakh crore in FY23.