PARAS - Paras Defence

📊 NSE: PARAS 🏢 Engineering 📅 Last Updated: 12/14/2025 10:53

💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue grew 43.6% YoY to INR 364.7 Cr in FY25 from INR 253.9 Cr in FY24. Standalone revenue grew 43.6% to INR 333.85 Cr, with the 'optics and optronics' segment being a primary driver of margin accretion.

Geographic Revenue Split

Domestic sales account for approximately 88% of revenue, while exports to Israel, Singapore, and the USA contribute ~12% (INR 39.62 Cr in foreign exchange earnings).

Profitability Margins

Operating margins improved significantly to 28.5-29% in FY25 from 21.2-22.5% in FY24. PAT margin stood at 16.9% in FY25. The improvement is attributed to a better product mix and quicker delivery of high-margin periscopes.

EBITDA Margin

EBITDA margins are expected to remain healthy in the range of 27-30% over the medium term, driven by the execution of a robust order book and margin-accretive product segments.

Capital Expenditure

Minimal large debt-funded capex is planned for FY26. The company maintains a strong cash balance of INR 110 Cr (INR 85-90 Cr unencumbered) to support operations.

Credit Rating & Borrowing

Crisil A-/Positive (upgraded from Stable) and Crisil A2+. Interest coverage ratio improved to 10.7 times in FY25 from 9.35 times in FY24. Standalone finance costs were INR 5.52 Cr.

⚙️ Operational Drivers

Import Sources

Israel, Singapore, and the USA are identified as key export and operational regions, with a foreign exchange outgo of INR 115.52 Cr in FY25, suggesting significant imports of specialized components.

Capacity Expansion

The company operates two manufacturing facilities in Thane and Navi Mumbai. While specific unit capacity is not disclosed, the company is scaling to execute an order book of INR 928 Cr.

Raw Material Costs

Cost of materials consumed increased by 10.49% to INR 125.05 Cr in FY25, representing approximately 34% of consolidated revenue.

Manufacturing Efficiency

Manufacturing efficiency is improving as reflected by the reduction in inventory days and faster realization of payments for periscopes.

📈 Strategic Growth

Expected Growth Rate

44%

Growth Strategy

Growth will be achieved through the execution of the INR 928 Cr order book (2.5x book-to-bill ratio), focus on high-margin optics/optronics, and capital infusion from a INR 135 Cr QIP. The company is also divesting non-core assets like Paras Green UAV (100% stake) and Ayatti Innovative (58.02% stake) to focus on core defence verticals.

Products & Services

High-precision products including periscopes, MK-46 and MK-48 Belt-fed Light Machine Guns, space optics, defence electronics, and heavy engineering turnkey solutions.

Brand Portfolio

Paras Defence and Space Technologies Limited (PDSTL).

New Products/Services

MK-46 and MK-48 Belt-fed Light Machine Guns under license from the Arms Act, 1959.

Market Expansion

Targeting increased exports to Israel, Singapore, and the USA, which currently account for 12% of sales.

Strategic Alliances

Established relationships with DRDO, BEL, ISRO, Tata Group, and L&T.

🌍 External Factors

Industry Trends

The industry is shifting toward indigenization with defence licenses extended from 3 to 15 years. Components were de-licensed in 2019 to encourage investment, and digital export systems have issued 1,500+ authorizations.

Competitive Landscape

Competes with major players like Bharat Electronics Limited (BEL), Tata Group, and L&T in the defence engineering space.

Competitive Moat

Durable moat built on 40+ years of experience, high entry barriers in defence optics, and established relationships with government entities like ISRO and DRDO.

Macro Economic Sensitivity

Highly sensitive to the Indian Defence Budget and 'Make in India' policy shifts.

Consumer Behavior

Demand is driven by government procurement cycles and tender-based awards rather than traditional consumer behavior.

Geopolitical Risks

Exposure to Israel (export market) and global supply chains for high-tech components.

⚖️ Regulatory & Governance

Industry Regulations

Governed by the Arms Act 1959, Factories Act 1948, and Industries (Development & Regulation) Act 1951. Defence license validity recently extended to 15-18 years.