ideaForge IPO: GMP, subscription status and what experts suggest on the issue
DT BUSINESS (MINT)- The ₹567 crore initial public offering of ideaForge, the country’s leading drone manufacturer, opened for subscription on Monday, June 26. The issue, which has a price band of ₹638-672, will close for subscription on June 29.
Subscription status: The issue received a strong response and was oversubscribed by the first day of the bidding itself. By 12:45 PM on Day one of bidding, ideaForge Technology IPO was subscribed 1.21 times. The company has received bids for 56,29,470 shares against 46,48,870 shares on offer, according to data from the BSE.
The portion for retail investors garnered the most bids. It was subscribed 4.81 times while the part reserved for employees was subscribed 3.46 times. Meanwhile, the non-institutional investors’ (NII) quota was subscribed 1.21 times, however, no qualified institutional buyers’ (QIB) bid for the issue was seen so far.
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GMP: The company’s shares witnessed a strong premium of ₹490 in the grey market on Monday, indicating a strong demand for the IPO.
However, one must note that grey market premium is only an indicator of how the company’s shares are performing in the unlisted market and can change quickly.
About the IPO: The IPO comprises a fresh issue of equity shares of up to ₹240 crore and an offer for sale (OFS) of up to 48.6 lakh shares by selling shareholders. The fresh issue portion from the offer has been reduced to this current amount from ₹300 after the firm raised ₹60 crore by offloading 8.92 lakh shares to institutional investors in a pre-IPO placement round.
Important dates: The date of allotment of units is likely to be 4 July and the issue is expected to list on the bourses on 7 July.
Anchor investment: The firm has raised ₹254 crore in the anchor round, which saw participation from marquee investors including Nomura, Invesco, HSBC, ICICI Pru MF, Mirae Asset MF, HDFC MF, and Goldman Sachs among others.
Reservation: About 75 percent of the net offer is reserved for the QIB portion, 15 percent for non-institutional investors, and 10 percent is set aside for retail investors.
Objective: The proceeds from its fresh issuance to the tune of ₹50 crore will be utilised for repayment of certain indebtedness availed by the company, ₹135 crore towards funding working capital requirements, ₹40 crore for investment in product development and general corporate purposes.
What do experts say?
Motilal Oswal: Subscribe
“We like IFL given its complex/wide product portfolio, presence in niche space, strong client relationship and high entry barriers. The issue is valued at 5x P/BV (peers avg: ~8x) on a post-issue basis, which is fairly valued. We believe IFL could benefit from government impetus on the defence space as well as rising enterprise demand. Hence we recommend Subscribe. Further, given the current buoyant market and high interest for defence stocks, the issue could see listing gains as well,” explained MOSL.
It also noted that ideaForge has one of the industry’s leading product portfolios with a dual presence in both civil and defence applications. IFL’s revenue jumped >5x over FY21-23 to ₹190 crore, while PAT turned positive in the last two years, with FY23 profit at ₹32 crore, it informed. Further, the brokerage added that given the current buoyant market and high interest in defence stocks, the issue could see listing gains as well.
Marwari Financial Services: Subscribe
“Considering the FY23 Annualized EPS of ₹7.68 on a post-issue basis, the company is going to list at a P/E of 87.54x with a market cap of ₹2,800 crore. whereas its peers namely MTAR technology, Data patterns and Astra microwave products are trading at a P/E of 58.52x, 84.95x, and 52.27x. We assign Subscribe rating to this IPO as the company is the pioneer and the pre-eminent market leader in the Indian UAS industry, with a first-mover advantage and strong relationships with a diverse customer base. Also, it is available at a reasonable valuation considering the future growth potential of the company.”
Axis Capital: Not Rated
While the brokerage has not rated the issue, it noted that ideaForge is the pioneer and the pre-eminent market leader in the Indian UAS market, with a market share of approximately 50 percent in fiscal 2022.
“Their promoters built their 1st quadrotor drone in 2004. They started their operations in 2007 and with a first-mover advantage, they are among the 1st few companies in India to enter the UAV market. Their in-house capabilities to design, develop, engineer and manufacture have enabled them to develop better products basis evolving demands of their customers, thereby enhancing customer experience with their products. Their ability to build a fully integrated system and having control over the full stack differentiates them from other players in the market. They are driven by a self-propagating flywheel, whereby as a result of their leadership position and their 1st mover advantage, they have been able to create a better user experience based on customers insights and with continuous technology improvements,” it said.
