DCX Systems Ltd IPO: All You Need to Know


Bengaluru-based DCX Systems Ltd will launch its initial public offering (IPO) next Monday— October 31. It is one of the fastest-growing companies in the Indian defence sector. In this article, we analyse the company and its IPO.

Company Profile - DCX Systems Ltd

Incorporated in 2011, DCX Systems Ltd (DCXSL) is one of the leading Indian manufacturers of electronic sub-systems and cable harnesses for the defence and aerospace sectors. It provides product assembly and system integration services as per customers’ requirements.

Key Products:

  • System Integration: They undertake system integration in areas of radar systems, sensors, electronic warfare, missiles, and communication systems.
  • Cable and Wire Harness Assemblies: It manufactures a wide range of cables and wire harnesses assemblies for the aerospace and defence industries.
  • Fine Wire Cable Assemblies: These are lightweight and high-temperature resistant cables used in aerospace, marine, space, and medical applications.
  • Wired Enclosure: The company produces high-reliability backplane assemblies and wired enclosures for the defence and aerospace markets.

DCXSL is one of the largest Indian Offset Partners (IOPs) for ELTA Systems Ltd and Israel Aerospace Industries Ltd, System Missiles & Space Division of Israel, for executing defence & aerospace manufacturing projects. The company operates through its manufacturing facility at Hi-Tech Defence & Aerospace Park SEZ in Bengaluru, Karnataka.

As of June 30, 2022 (Q1 FY23), DCX Systems had 26 customers across Israel, the United States, Korea and India. Their clients include Fortune 500 companies, multinational corporations and start-ups. The company's prominent clients include Bharat Electronics Ltd, Astra Rafael Comsys, Alpha-Elsec Defence & Aerospace Systems, and Kalyani Rafael Advanced Systems.

About the IPO

DCX Systems Ltd’s public issue opens on October 31 and closes on November 2. The company has fixed ₹197-207 per share as the price band for the IPO.

The fresh issue of shares (of the face value of ₹2 each) aggregates to ₹400 crore. The IPO also includes an offer for sale (OFS) by promoters and early investors, aggregating to ₹100 crore. Individual investors can bid for a minimum of 72 equity shares (1 lot) and in multiples of 72 shares thereafter. You will need a minimum of ₹14,904 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 936 equity shares (13 lots).

DCX Systems will utilise the net proceeds from the IPO for the following purposes:

  • Repayment/prepayment of certain borrowings - ₹110 crore
  • Funding working capital requirements - ₹160 crore
  • Investment in its subsidiary, Raneal Advanced Systems Pvt. Ltd, to fund its capital expenditure expenses - ₹44.88 crore
  • General corporate purposes

The total promoter holding in DCXSL will decline from 98.2% to 73.58% post the IPO.

Financial Performance

The company has posted healthy growth in both revenue and profits over the past three financial years (FY20-22). Its revenue has increased at a compounded annual growth rate (CAGR) of 56.64% during the same period! They generate a significant portion of the revenue from exports. In FY22, they exported $76 million worth of equipment, accounting for 4.7% of the overall defence exports from India. 

The company’s order book has grown from ₹1,941.31 crore in FY20 to ₹2,369 crore in FY22. All these metrics indicate that the firm is growing rapidly in the Indian defence space.

Risk Factors

  • DCXSL derived nearly 85.7% of its total sales revenue from its top 3 clients as of FY22. The loss of any of these customers or a fall in demand from them will severely affect the company’s overall business.
  • The company depends significantly on offset defence contracts for a majority of its revenue. Any changes in the offset defence policy or a decline in defence funding by the govt will adversely impact its ability to grow or maintain sales.
  • DCX System’s current order book may not necessarily translate into future income in its entirety. Some customers may modify, cancel, or put orders on hold.
  • Significant shortages or delays in the supply of raw materials could severely impact DCXSL’s estimated costs, expenditures, and timelines.

IPO Details in a Nutshell

The book-running lead managers to the public issue are Edelweiss Financial Services, Axis Capital, and Saffron Capital Advisors. DCX Systems filed the Red Herring Prospectus (RHP) for its IPO on Oct 19. You can read it here. Out of the total offer, 75% is reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 10% for retail investors.


India’s military spending in 2021 stood at $76.6 billion, rising 5% from 2020. This rise can be attributed to India’s existing tensions with Pakistan and increasing border tensions with China. Moreover, the market size for the Global Defence Electronics Market is estimated to be $142 billion in 2022. It is expected to grow at a CAGR of 6.6% to ₹237 billion by 2030. With its technology-enabled and scalable end-to-end solutions, DCXSL is well-positioned to capitalise on industry trends.

However, the company faces stiff competition from listed peers such as Bharat Electronics Ltd (BEL), Data Patterns, Paras Defence & Space Technologies, and Astra Microwave Products. To learn more about Indian defence stocks, click here.

The company has received some interest in the grey market. DCXSL’s IPO shares are trading at a premium of ₹80 in the unofficial market. Before applying to this IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. As always, do consider the risks associated with the company and come to your own conclusion.

What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.

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