APOLLO MICRO SYSTEMS LIMITEDIPO

Price Band : ` 270 –` 275

our recommendation “SuBScriBe”

THE OFFERIssue Open : 10 Jan 2018 to 12 Jan 2018

»» Issue Type: Book Built Issue IPO

»» Issue Size:› Fresh Issue aggregating up to ` 156.00 Cr

»» Face Value: ` 10 Per Equity Share

»» Issue Price: ` 270 - ` 275 Per Equity Share

»» Market Lot: 50 Shares

»» Minimum Order Quantity: 50 Shares

»» Listing At: NSE, BSE

Discount to Retail Investors & Employees:-A discount of Rs 12 per equity share is offered to Retail Investors & Employee.

CAPITAL STRUCTUREThe share capital of Company, is set forth below:-

(Amount in ` except share data)

Authorized Share Capital :-

2,70,00,000 Equity Shares @10 Aggregate value 27,00,00,000

Issued, subscribed and paid up capital before the Issue :-

1,50,00,000 Equity Shares @10 Aggregate value 15,00,00,000

Present Issue:-

Fresh Issue aggregating up to ` 156.00 Cr

OBJECT OF THE OFFER

The objects of the issue are:

To meet additional working capital requirement of the Company.

General corporate purposes

COMPANY OVERVIEWApollo Micro Systems designs, develops and sells high-performance, mission and time critical solutions to defense, space and home land security for Ministry of Defense, government-controlled public sector undertakings and private sector corporate.

It offers custom-built COTS (commercially off-the shelf) solutions based on specific requirements to defense and space customers. These systems are exclusively developed for a programme and hence such systems do not have any competition.

The classification of verticals and solutions offered by the company are as follows:

Defense Avionic Systems : These offer solutions for avionic applications, such as PCM encoder and decoder, Gimbal payload electronics, spread spectrum modem which are integrated in aircrafts or UAVs.

Continue…… Defense Aerospace Systems : These offer on-board weapon system electronics

solutions and ground checkout and launcher controller systems for missile system requirements.

Defense Naval Systems : These systems offer on-board weapon system electronics and ground support systems for underwater missiles (torpedoes), anti-torpedo decoys and jammers, submarines and ships.

Satellite Space Systems : These offer ground checkout systems and earth station acquisition systems for space applications.

Homeland Security & Telematics: These offers telematic and integrated surveillance systems like GPS-based vehicle tracking system, integrated surveillance systems consisting of CCTV and boom barriers and ore mining companies.

Transportation : It provides solutions related to telematics, data handling systems and automotive electronics and for Indian railways

ROAD MAP AHEADCompany objectives are to expand their market share and aim toaccomplish this through the following strategies:

Focus on R&D to develop complete systems to enhance the long-termprospects of Company.

Improving productivity and competitiveness.

Leverage Build To Print opportunity.

Expand business and geographical footprint through selectiveacquisitions.

Continue to grow overall market share by leveraging presence inexisting business verticals.

STRENGTHS

Recurring orders from existing programs.

Strong R&D Capabilities.

Quality control.

Qualified and experienced workforce and seniormanagement.

Proven track record in developing new technologicalsystems and order execution

FINANCIAL PERFORMANCE

Total Revenues stood ₹109.47cr, ₹ 211.79cr, ₹ 159.53cr, and₹108.76cr, in six months period ended September 30, 2017,Fiscal 2017, Fiscal 2016 and Fiscal 2015 respectively.

PAT was ₹ 7.11cr, ₹ 18.57cr, ₹ 10.00cr, ₹ 7.44cr in six months period ended September 30, 2017, Fiscal 2017, Fiscal 2016 and Fiscal 2015 respectively.

The Company's Order Book is ₹ 97.50cr excluding GST, as of November 25, 2017.

SNAPSHOT - CONSOLIDATED

INDUSTRY OVERVIEW

India has one of the fastest growing global defense markets and the countryspends USD 40 billion annually (1.62% of GDP in FY17) on the sector.

Defense expenditure is expected to continue to grow, primarily due to thecountry’s ageing military hardware and technology which is in dire need ofreplacing, and demands for defense against domestic insurgencies and hostility

from neighboring countries.

Current outlook on the defense spending by Government of India:

India meets its current defense requirements mostly by the way of imports.India spends around 31.5% of its total defense budget on imports, whichaccounts to around 60% of total defense equipment. The Finance

Minister (FM) in the union budget 2017-18 has allocated ` 2.74 trillion, as against` 2.58 trillion in 2016-17, with 6% rise, to the Ministry of Defense (MoD).Compared to the previous budget.

Continue……

The initiative aims to make India a preferred manufacturing destination comprising of 25 sectors that includes ESDM, automobiles, chemicals, IT, aviation, design manufacturing, renewable energy and several other sectors that rely heavily on electronics, expanding the opportunities to create employment, purchasing power, expenditure and supply.

RISK FOR THE BUSINESS Business is significantly dependent on various Public Sector

Undertakings and Government entities for their projects and could be materially affected if there are adverse changes in the policies of such Government entities.

Company work with government clients exposes to additional risks inherent in the government contracting environment.

Companies revenue depends to a large extent on a limited number of customers, and revenue could decline if company lose a major customer.

Continue……

Intense competition in the market for Defense ESDM sector could affect pricing and have a material adverse effect on business, financial condition and results of operations.

Company may incur penalties in respect of non –compliance with the provisions of the Companies Act, 2013

Political, economic or other factors beyond control may have an adverse impact on business, results of operations and prospects.

VALUATION

Company designs, develops and sells high-performance,mission and time critical solutions to defense, thus enjoyingcompetitive advantage amongst peers.

Going forward, defense expenditure would continue to grow,primarily due to the country’s ageing military hardware andtechnology which is in dire need of replacing.

Taking into consideration, the current market opportunities indefense and Government of India’s initiative, ‘Make in India’

aims to boost the nation’s domestic manufacturing sector as wellas to create market by targeting exports, the issue seems to befairly priced. We recommend to SUBSCRIBE the IPO.

DISCLAIMERS

This Research Report (hereinafter called report) has been prepared and presented by RUDRA SHARES & STOCK BROKERS LIMITED, which does not constitute any offer or advice to sell or does solicitation to buy any securities. The information presented in this report, are for the intended recipients only. Further, the intended recipients are advised to exercise restraint in placing any dependence on this report, as the sender, Rudra Shares & Stock Brokers Limited, neither guarantees the accuracy of any information contained herein nor assumes any responsibility in relation to losses arising from the errors of fact, opinion or the dependence placed on the same.

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