Should you invest in DCX Systems Limited IPO?

DCX Systems Limited incorporated on December 16, 2011, is among the leading Indian players in the manufacturing electronic sub-systems and cable harnesses for the defense and aerospace sector. It has been a preferred Indian Offset Partner for foreign original equipment manufacturers, for executing aerospace and defense manufacturing projects. The company is primarily engaged in system integration and manufacturing a comprehensive array of cables and wire harness assemblies and is also involved in kitting. They undertake system integration in areas of radar systems, sensors, electronic warfare, missiles, and communication systems. They provide product assembly and system integration services to address customers’ requirements.


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The company operates through its manufacturing facility located at the Hi-Tech Defence and Aerospace Park SEZ in Bengaluru, Karnataka. As of June 30, 2022, DCX Systems had 26 customers in Israel, the United States, Korea, and India, including certain Fortune 500 companies, multinational corporations, and start-ups. The company’s customers include domestic and international OEMs, private companies, and public sector undertakings in India across different sectors, ranging from defense and aerospace to space ventures and railways.

Promoters & Shareholding:

Pavan Kumar Bajaj and Karan Baja are the company promoters.


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Public Issue Details:

Offer for sale: OFS of approx. 4,830,917 equity shares at Rs. 2, aggregating up to Rs. 100 Cr and fresh of approx. 19,323,671 equity shares at Rs. 2, aggregating up to Rs. 400 Cr.

Total IPO Size: Rs. 500 Cr.

Price band: Rs. 197 – Rs. 207.

Objective: For repayment/ prepayment, Investment in our wholly owned Subsidiary, and for funding working capital requirements.

Bid qty: minimum of 72 shares (1 lot) for Rs. 14,904 and maximum of 13 lots.

Offer period: 31st Oct 2022 – 2nd Nov 2022.

Date of listing: 11th Nov 2022.


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  • Among the preferred Indian Offset Partners for the defense and aerospace industry with global accreditations.
  • Strategically located in aerospace SEZ with an advanced and modern manufacturing facility.
  • Well-positioned to capitalize on industry tailwinds.
  • Professional and experienced management team.


  • Highly dependent on a limited number of key customers.
  • Significant shortages of, or delays or disruption in the supply of raw materials could affect its business.
  • Exposed to foreign currency fluctuation risks.

Subscribe or avoid?

Sectorial outlook – Global spending touched $2.07 trillion in 2021, which was an increase of 6.69% over the corresponding period in 2020. The five largest spenders, accounting for 62% of the total global spending, were India, China, the United States, Russia, and the United Kingdom. Global Defence spending is expected to grow at a CAGR of around 3.99% between 2022 – 2027. The expected increase is based on a review of global GDP forecasts, as well as the expectation of ongoing political tension for the next two years. Any increase in geopolitical uncertainty because of rising tensions between the United States and China, India and China, India and Pakistan, Russia and NATO, China and Taiwan, Ukraine, Israel, and Palestine, is likely to result in significant upsides to the forecast. The defense manufacturing industry in India is an integral segment of the country’s economy. With increased national security concerns, the industry is set to grow substantially. The GOI has taken many measures to stimulate ‘Make in India’ operations through policy support programs to modernize its armed forces and minimize reliance on overseas defense acquisition. All of the above are expected to positively impact the sector the company is operating in the long term.


The financials (revenue and net profit) are shown in the graph below:


Valuation – For the last 3 years average EPS is Rs. 4.93 and the P/E is around 41.95x on the upper price band of Rs. 207. The EPS for FY22 is Rs. 9.19 and the P/E is around 22.5x. If we annualize Q1-FY23 EPS of Rs. 0.72, P/E is around 72x. It has Bharat Electronics (28x), Data Patterns (72x), Paras Defence (76x), Astra Microwave (79x), and Centum Electronics as its listed peers as per the RHP. The company’s P/E is between 22.5x and 42x. Net margins and EPS have been growing consistently. Looking at the valuation, it seems to be reasonable.

Recommendation – With the increasing drive towards “Atmanirbar” especially in the defense sector by GOI and the company being the preferred Indian Offset Partner for foreign original equipment manufacturers (OEMs) for executing aerospace and defense manufacturing projects, the company is well positioned to take advantage. After considering all the factors the listing still seems reasonable with good prospects hence we would recommend “Subscribe” to this IPO for investors from a medium to long-term perspective.



This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision.

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