Bharat Dynamics Ltd.
The defense manufacturer Bharat Dynamics IPO comprises of offer of sale at a price band of Rs 413-428 per share for the Rs 960.94 crore. Bharat Dynamics is engaged in the manufacture of Surface to Air missiles (SAMs), Anti‐Tank Guided Missiles (ATGMs), underwater weapons systems, launchers, Decoy Systems countermeasures and test equipment.The company is seeking 7800 crore market valuation through its IPO. The government will sell 22.45 million shares which amounts to diluting a 12.25% stake in the company, on a post-issue basis.

Bharat Dynamics IPO Details
Issue Period Tue March 13, 2018 – Thu Mar 15, 2018
Issue Details Offer for Sale of 22,451,953 Equity Shares
Issue Size (Rs. Cr) 952.79 Cr
Employee Reservation 458,203 Equity Shares  (19.15 Cr)
Price Band Rs.413 – 428
Retail & Employee Discount Rs.10/- per Equity Share
Bid Lot 35 Equity Shares and multiple thereof
Issue Structure :  
QIB 50% of the Net offer 
NIB 15% of the Net offer 
Retail 35% of the Net offer-up to 7,697,813 Equity Shares -321.77 Cr
Appls. Needed for 1x retail 2,19,938
BRLMs SBI Capital Markets, IDBI Capital Markets, Yes Securities
Registrar Alankit Assignment Ltd.
About Bharat Dynamics Limited
  • Hyderabad based Bharat Dynamics Ltd. is a leading defence public sector undertaking company engaged in the manufacture of surface-to-air missiles (SAMs), anti-tank guided missiles (ATGMs), underwater weapons, launchers, countermeasures and test equipment.
  • The Government owned company was incorporated in 1971 and has 3 manufacturing facilities located in Hyderabad, Bhanur (Telangana) and Vishakhapatnam.
  • It is in the process of setting up two new plants – one at Hyderabad, AP, and another at Amaravati, Maharashtra
Financials:
   (Rs. In Cr)
Particulars HYFY18 FY17 FY16 FY15 FY14
Revenue from Operations 1,805.60 4,832.70 4,078.70 2,840.80 1783.46
Growth in Revenues (%) 18.49% 43.58% 59.29%
Profit Before Tax 288 732.1 841.2 643.9 542.3
Profit After Tax 175.5 490.3 562 443.5 360.12
Net Profit Margin 9.72% 10.15% 13.78% 15.61% 20.19%
Share Capital~ 91.6 122.1 97.7 115
Reserves 1,539.00 2,090.20 1,753.40 1,537.60
Net worth 1,630.60 2,212.40 1,851.20 1,652.60
EPS (Rs.) 14.2 40.1 40.3 31.8
RONW(%) 10.50% 22.10% 30.30% 26.80%
Net Asset Value (Rs.) 177.9 181 189.3 143.7
Face Value 10
IPO Price 428
Price/Book Value 2.41
Post Issue Equity 183.28
EPS (Post IPO) 26.75
PE (post IPO) fy17 16.00
CAGR Sales 3 Yrs 39.41%
CAGR Net Profit 3 Yrs 10.83%
Market Cap 7844.38 crore
Market cap / Sales 1.62
Rationale for Investment
  • Bharat Dynamics Limited has been identified as the Prime Production Agency  to develop indigenous, sophisticated and contemporary missiles through the Integrated Guided Missile Development Program (IGMDP).
    Company has  capabilities to manufacture and integrate guided weapon systems.
  • Bharat Dynamics Limited current order book stands at  Rs. 10,543 cr, comprising the Akash Weapon System, LR SAM, MR SAM (Indian-Israeli surface-to-air missile also BARAK 8) ,  INVAR (3 UBK 20) ATGM ( anti-tank guided missiles) and the Konkurs-M ATGM ( anti-tank guided missiles).
  • This puts the revenue visibility for next two years at 2.2x (on FY17 revenues of Rs. 4,832 crore). 
  • The Company is likely to benefit from Governments Make in India Program. 
  • Bharat Dynamics Limited is currently exporting the light weight torpedoes.
  • The company intends to offer products such as Akash SAM, light weight torpedoes and  other systems  system to the international markets. 

Bharat Dynamics IPO

Risks 
  • Bharat Dynamics Limited is dependent on a single customer, the Indian armed forces for ts orders.
  • PSUs performance in general leaves much to be desired.
Bharat Dynamics IPO: Assessment
  • The company is a dominant player in defence sector. The Indian defense market is in a state of transition, as a result of new policies promulgated by the government. Bharat Dynamics Limited is in the process of setting up to new plants – one at Hyderabad, AP and another at Amaravati – Maharashtra. 
  • Bharat Dynamics Limited order book stands at Rs. 10,543 crore, against FY17 revenues of Rs. 4,832 crore which is More than 2x)
  • The P/E on FY 17 EPS on the diluted equity post IPO works out to  be Rs. 16 which appears reasonable.
  • Revenues have grown at a compounded at annual growth rate of 40% and profits  at 11% in last three years.
  • Despite shaky market conditions, at this stage  I intend to apply in Bharat Dynamics IPO. ( Change in Stance. See Below)’
  • Bharat Dynamics IPO: Response very Poor Till 11:20 am on Day 3. Shall apply only if some QIB demand other than Govt institutions comes in.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.

2 thoughts on “Bharat Dynamics IPO Review: Priced Reasonably and Good Prospects

  1. dear sir,

    many thanks for your valuable research.

    i am waiting for your ipo analysis on tarachand logistics sme, HAL, bandhan bank, karda construction and sandhar technologies.

    so pl. do the needful at your earliest.

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