Data Patterns makes a strong debut, lists at 48% premium to issue price

Data Patterns (India) Ltd (DPL) has made a strong market debut, with its shares listed at Rs 864, a 48 per cent premium over its issue price of Rs 585 per share on the BSE. The stock opened at Rs 856.05, 46 per cent higher against the issue price on the National Stock Exchange (NSE).

At 10:01 am; Data Patterns traded at Rs 808.05, up 38 per cent when compared to its issue price on the BSE. The stock hit a low of Rs 805 on the BSE and Rs 800.10 on the NSE, respectively, in intra-day trades. A combined 3.6 million equity shares changed hands at the counter on the NSE and BSE.

Data Patterns is among the few vertically integrated defense and aerospace electronics solutions provider catering to the indigenously developed defense products industry.

The Rs 590 crore initial public offer (IPO) of the company, had received a stellar response from the investors as the issue was subscribed 119.62 times. The qualified institutional buyer’s category was subscribed 190.86 times. The non institutional investor’s category was subscribed 254.22 times, while the retail investors category was subscribed 23.14 times, data showed.

The IPO aims to utilize the net proceed towards the prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company. To funding working capital requirements of the company, upgrading and expanding company’s existing facilities at Chennai and for general corporate purposes.

Data Patterns’s innovation focused business model, large market opportunities in Indian defence & aerospace, strong order book across product categories, consistency in profitable growth due to scalable business model are likely to help improve its growth and margins in the long run, according to analysts at ICICI Securities.

Motilal Financial Services in IPO note had said the brokerage firm like Data Patterns given its vertically integrated business model, well-diversified portfolio, robust order book and strong client relationship along with consistent financials. The issue is valued at 55x FY21 P/E (on a post issue basis), v/s. 167x for MTAR and 138x for Paras Defense. Analyst believe it could benefit from the government impetus on the defense/ aerospace expenditure

Aayush Agrawal, Senior Analyst, Swastika Investmart believes Data Patterns has the potential to grow rapidly and exponentially as part of the 'Make in India' initiative. The company has experienced rapid growth in revenues and profits, with margins that are soaring. At an upper price band of Rs 585, the IPO is priced at a PE ratio of 49x and a P/BV ratio of 13x to FY21 earnings. Positive sentiment is likely to accompany the IPO and the company as a result of the defense sector's attractiveness. Investors who got allotments should hold the stock while new investors can look for buying opportunities at any correction or consolidation, the brokerage firm said.