DCX Systems Limited IPO – Price, Allotment, GMP, Review

Introduction

The IPO market is in the news a lot this year with many IPOs of not only big companies but also from the MSME sector entering the markets. The most recent IPO is of DCX Systems Limited which is a mix of fresh issue and Offer of Sale. This IPO subscription was open from 31st October 2022 to 2nd November 2022. After allotment on 7th November, the company’s shares will be listed on the stock exchange on 11th November 2022. 

The IPO was subscribed 69.79 times on the last day of IPO subscription. 

Details of this IPO and other relevant details of the company are mentioned below.  

Read More: Top Defence stocks in India

IPO Details

1. IPO Size

   Category	Details
   IPO Opening Date	31st October 2022
   IPO Closing Date	2nd November 2022
   Listing	NSE, BSE
   Issue Type	Book Built Issue IPO
   Face Value of Shares	Rs 2 per share
   IPO Price Band	Rs 197 – Rs 207 per share
   IPO Size	Rs 500 crores

2. IPO Dates

   The DCX Systems Limited IPO will be open for a brief period following which the allotment process and listing process will begin. The important dates of the IPO and listing are tabled below.

   Event	Date
   Price Band Allotment	21st October 2022
   Anchor Investors Allotment	30th October 2022
   Opening date	31st October 2022
   Closing Date	2nd November 2022
   Allotment date	7th November 2022
   Refund Date	9th November 2022
   Share Credit Date	10th November 2022
   Listing Date	11th November 2022

3. IPO Lot Size

   Like every IPO, investors willing to invest in DCX Systems Limited will have to purchase shares in lots of the predetermined sizes. Therefore the subscription to fractional shares is not permitted. The details of the lot sizes and the minimum amount of investment for retail investors is tabled below. 

   Category	Details
   Minimum investment	1 lot
   Shares in each lot	72 shares
   Minimum amount of investment per lot	Rs. 14,904
   Maximum permissible investment in Lots	13 lots
   Maximum shares for investment	936 shares
   Maximum amount of investment permissible	Rs. 1,93,752

4. IPO Reservation

   The three categories of investors eligible for investing in DCX Systems Limited and the share reserved for each category are tabled below.

   Category of Investor	Reservation of the IPO applicable	Maximum shares for subscription	Amount of investment
   QIB (Qualified Institutional Buyers)	75%	18,115,952	Rs.375 crores
   NII (Non-Institutional Bidders)	15%	36,23,188	Rs.75 crores
   RII (Retail Individual Investors)	10%	24,15,549	Rs.50 crores

DCX Systems Limited IPO Objective

The objects of the IPO state that the net proceeds from the IPO will be used for the following purposes,

• Repayment or prepayment, in part or in full, of certain borrowings that have been availed by the company.
• Meeting the working capital requirements of the company
• The proceeds will also be used to fund the capital expenditure of its investment in the wholly owned subsidiary Raneal Advanced Systems Private Limited.
• The IPO proceeds will also be used to meet the expenses of general corporate purposes.

About DCX Systems Limited

DCX Systems Limited, formerly known as DCX Cables Assemblies Private Limited, is in the business of manufacturing electronic sub-systems and cable harnesses. It is engaged in system integration as well as manufacturing a comprehensive array of cables, wire harnesses, and kitting. Furthermore, the company also supplies assembly-ready kits that are used for electronic and electromagnetic parts.  The company is also a preferred Indian partner for Foreign OEMs in contracts for the execution of aerospace and defence-related manufacturing projects. The company’s financial future is quite optimistic on account of growing FDI in the defence sector as well as approximately 26 customers in countries across the world like Isreal, the United States, Korea, and India which are private companies and public sector companies and startups.  The defence industry in the country is expected to grow up to US$70 billion which provides significant growth opportunities for the company. The company saw an increase in its orderbook from Rs.2369 crores to Rs.2563 crores as of June 2022.  

Financials of the company

The core financials of the company are tabled below. 

Year	Total Assets (Rs. In crores)	Operating Revenue (Rs. In crores)	Profit after tax (Rs. In crores)	Basic EPS	Diluted EPS	RONW
2022	942	1102	65	9.19	9.19	56.75%
2021	793	641	29	4.22	4.22	63.18%
2020	699	449	10	1.39	1.39	55.79% (consolidated)

Strengths of the company

Some of the key strengths that make an investment in this company an attractive option is,

1. As mentioned above, DCX Systems Limited is a preferred Indian partner for the foreign defence and aerospace industry and has global accreditations.
2. The business is technology abled and can be further scaled to meet the growing demand for its products.
3. This business has enough visibility of cash flows and has the ability to mitigate its operational and technology risks.
4. An additional benefit for the business is its location as it is strategically located in the Aerospace SEZ (Special Aerospace Economic Zone) that is equipped with advanced manufacturing facilities.
5. The company has a very capable senior management team as well as experienced and qualified promoters that can help it achieve its objectives.

Risks of investment

1. A heavy concentration of customers The major chunk of business of the company comes from three main customers. This concentration of revenues can pose a survival risk if any of the company is no longer  a client pr of the demand for the company’s products decreases.
2. Availability of raw materials The disruption of the supply chain is a serious concern as the business depends on raw materials for production and meet its contractual obligations. Any delay or disruption in production due to irregular or lack of supply of necessary raw materials can have an adverse impact on the company’s financials.
3. Liquidity concerns DCX Systems Limited has a high level of working capital requirement and being on the heavier side of the debt-equity ratio, generating timely finances may prove to be difficult for the company.
4. Currency fluctuations The revenues generated from the offshore clients as well as the amount paid to foreign clients for inputs are subject to currency fluctuations. This may lead to a loss of revenues or an increase in the cost of production, both of which are not good news for the bottom line of the company.

What is the Grey Market Premium (GMP) on DCX Systems Shares?

As of 02 Nov, the grey market premium for the shares of DCX Systems is Rs 82 as per market observers.

Should you apply for DCX Systems Limited IPO?

Now comes the golden question, is it a good bet for investors? The company has seen a  growth in its revenue of 56% CAGR as well as a significant increase in net profits (160% CAGR between FY 20 and FY 22). The company also has a high RONW (Return on Net Worth) which is better than its peers but also a high debt-equity ratio of 4.27. One of the prime advantages for the company is its dominance in its segment and a corresponding increase in its profit margins. Therefore, DCX Systems IPO is a good investment opportunity for investors looking for listing benefits as well as aiming for a good addition as a long-term investment.  

How to apply for DCX Systems Limited IPO?

Investors can invest in this IPO through the Fisdom app.

FAQs