Data Patterns (India) Limited - IPO Note

Defence and Aerospace

Data Patterns (India) Limited - IPO Note

Defence and Aerospace

Price range
Rs. 555 – 585
Issue Period:
Dec 14, 2021
Dec 16, 2021
December 14, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 588.22 cr.
Public Issue
1.005 cr. shares
Market cap post IPO
2,892 – 3,035 cr.
Equity Pre - IPO
4.78 cr.
Equity Post - IPO
5.19 cr.
Issue type
Fresh Issue and Offer for Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Key Strengths and Strategies

Integrated Defence and Aerospace Electronic Solutions Provider, Positioned to Benefit from Make in India Opportunity:
Since inception, the company has focused on designing and building its own products. It is focussed on developing complete systems and sub-system solutions such as radars, electronic warfare, communication systems, radio frequencies and microwave, Military Commercial Off the Shelf, avionics, missile and torpedo electronics, fire and launch control systems, space-based systems, and automatic test equipment. Defence Research and Development Organisation (DRDO) is one of the company’s valuable customers. The company's management feels that the company’s competency, along with the government's emphasis on indigenization, puts DPIL in a good position to rapidly scale-up several existing products, allowing it to reap benefits from the Make-in-India initiative.

The company successfully bid for and obtained a Rs. 380 crores contract from the Ministry of Defence for nine precision approach radars for the Navy and Air Force, which are currently in the delivery stage. With Indian defence requirements being opened out to indigenous manufacturers, the management believes that opportunities are now available which can be addressed based on in-house capabilities to develop such large systems.

Sound Order Book Across Product Categories Supplying to Marquee Customers:
As of September 2021, the company has an order book of Rs. 581.3 crores with orders from several marquee customers including Ministry of Defence, Defence Research and Development Organisation, BrahMos Aerospace, Hindustan Aeronautics, Bharat Electronics, India Government Space Organisation (supplying products for 20+ years), and Defence Public Sector Undertakings involved in missile space. The company is currently engaged in supply of products to several prestigious defence projects in India including LCA (Tejas Mk I A Light Combat Aircraft), the HAL Dhruv, Light Utility Helicopter (LUH), and the BrahMos missile programme and in each of these projects, the company’s products are critical in nature. It continues to invest in product development on various platform-specific products which has an annuity requirement thus ensuring continuity of business in the coming years.

Due to its diversification, the company’s order book has increased from Rs. 80.5 crores as on March, 2017 to Rs. 581.3 cores as on September, 2021. The break-up of the order book is as follow:

Data Patterns (India)

Source: Company RHP

Certified Manufacturing Facilities having International Standards:
The company’s 100,000 sqft manufacturing unit has facilities for design, manufacturing, qualification, and life cycle support of electronic systems. The company is certified for various standards across product life cycles, including aerospace systems under AS9100D by TUV-SUD, IPC Standards for PCB design, DO 178B for software for airborne systems, Software life cycle processes, and environment standards MIL-STD-810, JSS-55555 and EMI-EMC standard MIL-STD-461. The company’s systems and processes are subject to periodic audit by its customers. Its Electronic Manufacturing Services (EMS) line is certified for production by the Indian government space organisation.

Sound Financial Profile
As per the company’s filings, it is one of the fastest growing companies in Defence and Aerospace Electronics Sector in India with higher margins and return ratios. The company’s top line has grown at a CAGR of 30.7% between FY19 – FY21. The absolute EBITDA has posted a CAGR of 89.8% and EBITDA margin has seen consistent up move from 19.5% in FY19 to 41.1% in FY21. Its PAT has grown from Rs. 7.7 crores in FY19 to Rs. 55.57 crores in FY21. PAT margin has also improved from 5.9% in FY19 to 24.8% in FY21. RoE and RoCE stood at 26.8% and 34.7%, respectively in FY21.

Particulars (Rs. in Crores) FY19 FY20 FY21 H1FY22
Revenue 131.06 156.10 223.95 96.45
EBITDA 25.55 43.16 91.99 37.82
EBITDA Margin 19.49% 27.65% 41.08% 39.21%
Profit After Tax 7.70 21.05 55.57 23.21
PAT Margin 5.88% 13.48% 24.81% 24.06%
RoE 5.80% 13.71% 26.75% 10.71%
RoCE 12.45% 23.39% 34.69% 13.41%

Source: Company RHP

Expansion of Product Portfolio Focused on Complex Technologies:
The company intends to continue expand its capabilities and product portfolio to enhance offerings in the defence and aerospace electronics space, especially in complex technology products. It also intends to opportunistically bid for higher value projects demanding significant use of complex technologies. For instance, the company has developed and deployed its first Nano satellite in 2017, after which, it has received additional two contracts to design and build nano satellite.

DPIL is further investing in AESA radars, modern EW Systems, Airborne sensors, among others in a view that these complex products have wide range of applications and would provide a higher value growth opportunity. The company also intends to avail the benefits from the Make-in-India programme by participating in tenders for large and complicated projects.

Expanding Manufacturing Facility:
The company intends to deploy a part of fresh issue towards upgrading and expanding its existing facility. The proposed expansion includes acquisition of additional 2.8 acres of land, large systems integration hangar, complete radar integration, electronic warfare vehicle integration, augmented environmental test infrastructure, multi ton material handling, additional EMS line, and clean room for satellite integration. The company also intends to augment its design and development capabilities for various verticals through procurement of software, testing equipment and other related hardware.


Dependence of Government of India: Contracts from the Government of India and related entities provide for the majority of the company's revenue. Any drop in orders, termination of current contracts, or postponement of existing or projected contracts, as well as any decline or reprioritization of the Indian defence or space budget, could have an adverse effect on the company.

Concentration of Customers: A substantial amount of DPIL's revenue comes from a small number of customers, including DRDO, MoD, BrahMos Aerospace, and the Indian government space organisation. The loss of any big client or a considerable drop in business could have an adverse impact on the company.

Significant Working Capital Requirements: The business requires to maintain a high level of working capital because the activities are characterised by long product development periods and production cycles. Delays in payment under on-going contracts, increase in inventory, and accelerated payments to suppliers could adversely impact working capital. However, the company expects gradual decrease in inventory and receivables days in coming years, thereby, improving working capital days.

Shares Pledge: one of the Promoters, Srinivasagopalan Rangarajan, has pledged 12,521,025 Equity Shares with the State Bank of India, accounting for 26.2% of the company's paid-up capital for a loan facility from State Bank of India for Rs. 103.88 crores, (Out of the total credit facilities, the fund-based working capital facilities may be repaid with the proceeds of the fresh Issue.)

Changes in Raw material Prices: The company sources its raw materials from both domestic and foreign markets. However, the majority of the raw material (75%) is imported. Multiple variables can influence raw material pricing, including transportation costs, worldwide demand and supply disruptions, import levies, and so on. These factors might affect the company's import expenses, which can affect profits.

Operates in Competitive Business Environment: Price is a major factor in most tenders and biddings are usually subject to intense price competition. With the liberalisation of the Indian defence and space sector that allows private and foreign companies to participate in defence and space contracts, the company will face competitive biddings.

Company Description

Incorporated in 1998, Data Patterns (India) Limited (DPIL) is vertically integrated defence and aerospace electronics solutions provider catering to defence product industry. It caters to entire spectrum of defence and aerospace platform such as space, air, land, and sea. It has a design capability across processors, power, radio frequencies and microwave, embedded software and firmware, and mechanical engineering. Its competencies include design and development in (electronic hardware software, firmware, mechanical, product prototype), functional testing and validation, environment testing and verification, and engineering services opportunities.

The company has invested in and developed a reusable building block model leading to capabilities and competence across various product domains. Some of the notable achievements include (see image below)

Data Patterns (India)

Source: Company RHP

Its production plant in Chennai is a 100,000-square-foot factory. An Electronic Manufacturing Services line, clean rooms, board, box, and rack level integration capability, and environmental testing are all available at the facility. The company is certified for aerospace systems under AS9100D by TUV-SUD, International Printed Circuit Standards for Printed Circuit Board design, and DO 178B for software for airborne systems. The company is planning to expand its facility, which will include a proposed doubling of available floor space and manufacturing capacity, as well as the ability to handle large and heavy equipment, the integration of large radars and mobile electronic warfare systems, and a satellite integration facility.


Data Patterns (India) Limited has had a strong topline performance and has consistently improved margins. It also outperforms its listed peers MTAR Technologies, Bharat Electronics, and Paras Defence and Space Technologies in terms of return ratios. The company's order book has also improved significantly from FY17 levels to H1FY22 levels. Pursuant to increase in order book, the company intends to expand its facility in Chennai, which gives us confidence that the company could cater to the growing demand and enhance product portfolio. Given the company's focus on extending its product offerings in complicated technologies, we believe it is capable of winning more orders.

We also expect the company's working capital days to improve in the coming years. The inventory holding period levels could gradually decrease as contracts in the order book are scaled up. Also, the receivables days has been consistently trending down over the past three years and the trend is likely to continue going forward owing to higher production-based contracts.

At the upper price band of Rs. 585, the issue is valued at ~49x of FY21 earnings, which looks comparatively decent compared to average of ~90x of the other listed peers. We recommend to SUBSCRIBE the issue.

Peer Comparison

Particulars (Rs. in Crores) FY21 Revenue CAGR (FY19 - FY21) OPM (%) PAT (%) RoE (%) RoCE (%) EPS PE (x)
Data Patterns 30.72% 41.08% 24.81% 26.75% 34.69% 11.89 49.20
MTAR Technologies 15.83% 33.72% 18.70% 9.67% 19.21% 14.98 159.54
Bharat Electronics 7.70% 22.78% 14.88% 18.98% 27.92% 8.61 23.93
Paras Defence and Space Tech -7.26% 32.06% 11.36% 50.52% 22.41% 5.04 145.04
Astra Microwave Products 47.78% 12.00% 4.50% 5.16% 10.03% 3.33 78.38
Centum Electronics -6.27% 10.82% 2.10% 7.69% 8.34% 13.30 42.41

Source: Company RHP, Screener

Key Information

Use of Proceeds:
The total issue size is Rs. 588.22 crores, of which Rs. 240 crores is fresh issue and balance (Rs. 348.22 crores) is OFS. The company will utilise the net proceeds from the fresh issue to prepay/repay of certain borrowings, funding working capital requirements, and upgrading and expanding existing facility in Chennai (See the table below)

Sr. No. Particulars Amount (INR. CR.)
1 Repay/Prepay Certain Borrowings 60.80
2 Funding Working Capital Requirements 95.19
3 Upgrading and Expanding Facility in Chennai 59.84
4 General Corporate Purposes -

Book running lead managers:
JM Financial Limited and IIFL Securities Limited.

Srinivasagopalan Rangarajan (Chairman and Managing Director), Rekha Murthy Rangarajan (Whole-time Director), Vijay Ananth K (Chief Operating Officer and Chief Information Security Officer), Desinguraja Parthasarathy (Chief Technical Officer), Thomas Mathuram Susikaran (Senior Vice President-Business Development), Venkata Subramanian Venkatachalam (Chief Financial Officer), and Manvi Bhasin (Company Secretary and Compliance Officer)

Financial Statement

Profit & Loss Statement:- (Consolidated)

Particulars (Rs. in Crores) FY19 FY20 FY21 H1FY22
Revenue from Contract with Customers 131.06 156.10 223.95 96.45
COGS 48.95 56.09 70.40 21.02
Gross Profit 82.12 100.01 153.55 75.42
Gross Profit Margin (%) 62.65% 64.07% 68.56% 78.20%
Employee Benefit Expenses 37.65 42.27 48.42 28.12
Other Expenses 18.92 14.58 13.14 9.48
EBITDA 25.55 43.16 91.99 37.82
EBITDA Margin (%) 19.49% 27.65% 41.08% 39.21%
Depreciation and Amortisation 5.86 5.48 5.55 2.96
EBIT 19.69 37.68 86.44 34.86
Finance Cost 10.78 13.34 14.50 4.81
Other Income 1.45 4.09 2.60 0.73
Profit Before Tax 10.36 28.43 74.53 30.78
Tax Expenses 2.66 7.38 18.96 7.57
Profit After Tax 7.70 21.05 55.57 23.21
PAT Margin (%) 5.88% 13.48% 24.81% 24.06%