Digilogic Systems coming with IPO to raise Rs 85.26 crore

Digilogic Systems

• Digilogic Systems is coming out with an initial public offering (IPO) of 81,98,400 shares in a price band of Rs 98-104 per equity share. 
• The issue will open on January 20, 2026 and will close on January 22, 2026.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 2 and is priced 49 times of its face value on the lower side and 52 times on the higher side.
• Book running lead manager to the issue is Indorient Financial Services.
• Compliance Officer for the issue is Kameswara Rao Vempati.

Profile of the company

Digilogic Systems, established in 2007, is a technology-led company engaged in the design, development, integration, manufacturing, supply and support of Automated Test Equipment (ATE) systems, radar and Electronic Warfare environmental simulators, application software, and embedded signal processing solutions for the defence and aerospace engineering sector. It generally receives purchase orders either directly from government entities through the tendering process and indirectly via third-party vendors supplying to government entities.

The company operates through two facilities: Hyderabad (Corporate HQ), its 10,688 sq. ft Registered Office and facility integrates design, engineering, administrative, and manufacturing functions, also overseeing activities related to business development, marketing, finance, legal & secretarial, and human resources; and Bangalore (Marketing Office), a complementary hub tailored for business development, customer engagement, and project execution support. Certified with AS9100D and ISO 9001:2015 issued by TUV SUD America Inc., its facilities are equipped to meet international standards for aerospace suppliers, ensuring customers and investors that its systems are designed for precision, compliance, and repeatability.

Its business involves the design, development, manufacturing, assembling, integration, and support of test systems, system software, and embedded signal processing solutions. Its offerings are organised into three segments: i) Test Systems: which include Automated Test Equipment, Checkout Systems, and Radar/EW Simulators; ii) Application Software: comprising data acquisition platforms and IP cores; and iii) Services: providing system integration, upgrades, and lifecycle support.

Proceed is being used for:

• Capital expenditure towards setting up of proposed new facility
• Pre-payment/ re-payment, in part or full, of certain outstanding borrowings availed by the company
• General corporate purpose

Industry Overview

India's defence sector is backed by robust government spending and structural policy reforms. The total defence budget allocation for FY 2025-26, excluding pensions, stands at Rs 6.8 lakh crore reflecting the government's strong commitment to strengthening military capability and indigenous manufacturing. Further, the capital influx on indigenization through the ‘Aatmanirbhar Bharat’ initiative. Strategic reforms, including positive indigenization lists, production-linked incentives (PLIs), and defence testing infrastructure schemes, are accelerating domestic production capabilities in aerospace, armaments, and next-generation technologies. India has also emerged as one of the top global investment destinations, driven by liberalized FDI norms-up to 74% through the automatic route and 100% via government approval. FDI Scenario of Defence Sector in India: From 2018 to 2024, the Government of India have liberalized its FDI policy in the defence and aerospace sector to attract foreign capital, bring in cutting-edge technologies, and reduce import dependency. In September 2020, the government raised the automatic FDI cap to 74%, marking a pivotal shift that allowed foreign Original Equipment Manufacturers (OEMs) to hold a majority stake. Additionally, in 2022–2023, the government introduced exemptions and eased entry norms for defence-related start-ups and MSMEs. This allowed smaller technology ventures to receive FDI below the threshold without extensive compliance burdens.

The total defence budget allocation for FY24-25, excluding pensions, stands at Rs 6.2 lakh crore, reflecting a 7.1% increase over FY23-24. Of this, Rs 4.5 lakh crore is earmarked for revenue expenditure, while Rs 1.7 lakh crore has been allocated to capital expenditure. The capital expenditure for FY24-25 continues to be presented as a consolidated allocation for Defence Services, rather than being split among the Army, Navy, and Air Force - a budgeting approach that has become institutionalized over recent years. Higher capital allocation highlights the government’s continued focus on modernizing military infrastructure and strengthening force readiness through the procurement of next-generation platforms and technologies.

India's aerospace and defence sector is witnessing a visible shift with the private sector gaining ground alongside traditional public sector entities. Since FY17, the share of private companies has grown at a compound annual growth rate (CAGR) of 8.0%, highlighting increased participation, policy support, and greater involvement in critical defence manufacturing programs. By FY25, private sector revenue reached Rs 28,800 crore, while the public sector generated Rs 1,07,100 crore. This reflects doubling of private sector revenue over seven years, driven by liberalised policies and greater technology access. One of the key enablers for this growth has been the delicensing of 65% of components and sub-systems, creating ample room for private players to enter traditionally restricted areas.

Pros and strengths

Strong industry relationships and international collaborations: The company has established long-standing relationships with key institutions within India’s defence and aerospace ecosystem, where its solutions have been deployed as part of core projects. It is empanelled as a design partner with the Development cum Production Partner (DcPP), which reflects its recognised technical competence and the confidence placed in its capabilities by sector stakeholders. This role entails innovation, compliance with stringent technical and quality standards, and integration with mission-critical applications, which in turn provides it with enhanced visibility and access to larger opportunities in the sector.

End-to-end solution capabilities: The company provides integrated solutions across the entire system development lifecycle, including system design, prototyping, embedded software development, manufacturing, hardware integration, functional and environmental testing, and post deployment support. By offering this wide range of services under a single framework, it is able to participate in multiple stages of a project, from concept design to operational deployment. This integrated approach facilitates continuity of engagement with its clients and enables it to address their technical requirements in a structured manner.

Reusable engineering platforms for efficient delivery: Its solutions are developed using a repository of hardware modules and software components that can be adapted to meet specific client requirements. This approach enables faster customization for diverse defence and aerospace applications and supports more efficient project execution. By leveraging existing designs and components, it is able to reduce development effort, optimise resource utilisation, and improve predictability in delivery schedules. Further, the reuse of engineering efforts across projects contributes to faster turnaround times and reduces the likelihood of design rework.

Risks and concerns

Dependence on key suppliers and risks related to raw material procurement: In the ordinary course of its operations, the company is depending on limited suppliers for its raw material requirements. The company has done 82.52%, 78.89%, 64.24%, and 68.54% of its purchase from top 5 suppliers for the period ended September 30, 2025, FY25, FY24, and FY23 respectively. The loss of one or more of its significant suppliers or any increase in the cost of raw materials it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows. Its reliance on a select group of suppliers may also constrain its ability to negotiate its raw material requirements, which may have an impact on its profit margins and financial performance. Similarly, deterioration of the financial condition or business prospects of these suppliers could reduce their ability to meet its requirements. Further, if it experiences a significant or prolonged shortage of raw materials from any of its suppliers, and it cannot procure raw materials from other sources, it will be unable to meet its production schedules which will adversely affect its sales and customer relations.

Impact of government budgetary and policy changes on business: The company’s business is largely dependent on contracts from the Government of India (GoI) and associated entities including defence public sector undertakings and government organizations involved in space research. A decline or reprioritisation of the Indian defence or space budget, reduction in orders, termination of existing contracts, delay of existing or anticipated contracts or programmes or any adverse change in the GoI’s defence or space related policies will have a material adverse impact on its business. The company has secured 99.02%, 84.99%, 96.92% and 99.11% of total revenue from operations through Government organizations for the period ended September 30, 2025, FY25, FY24, and FY23 respectively.

Risks related to third-party transportation and supply chain delays: The company is dependent on third party transportation for the delivery of its finished products and any disruption in their operations or a decrease in the quality of their services could affect the company's reputation and results of operations. These transportation facilities may not be adequate to support its existing and future operations. In addition, such goods may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be delay in delivery of products which may also affect its business and results of operation negatively. An increase in the freight costs or unavailability of freight for transportation of its raw materials may have an adverse effect on its business and results of operations. Further, disruptions of transportation services due to weather-related problems, strikes, lockouts, inadequacies in the road infrastructure and port facilities, or other events could impair ability to procure raw materials or delivery of goods on time. Any such disruptions could materially and adversely affect its business, financial condition and results of operations.

Outlook

Digilogic Systems is a technology-led company engaged in the design, development, integration, manufacturing, supply and support of Automated Test Equipment (ATE) systems, radar and Electronic Warfare environmental simulators, application software, and embedded signal processing solutions for the defence and aerospace engineering sector. On the concern side, the company has a significant working capital requirement. If it experiences insufficient cash flows from its operations or are unable to borrow to meet its working capital requirements, it may materially and adversely affect its business, cash flows and results of operations. Moreover, its present facility and proposed new facility are situated at Hyderabad, in the state of Telangana, resulting in concentration in a single region. Any slowdown or shutdown or any interruption for a significant period of time at its present facility and proposed new facility for a significant period of time, may in turn adversely affect its business, financial condition and results of operations.

The company is coming out with a maiden IPO of 81,98,400 equity shares of face value of Rs 2 each. The issue has been offered in a price band of Rs 98-104 per equity share. The aggregate size of the offer is around Rs 80.34 crore to Rs 85.26 crore based on lower and upper price band respectively. On performance front, revenue from operations increased by 39.76% from Rs 5,155.93 lakh in FY24 to Rs 7,205.98 lakh in FY25, due to increase in orders and timely execution of orders planned during FY25. Moreover, the net profit increased by 238.12% from Rs 239.96 lakh in FY24 to Rs 811.35 lakh in FY25.

The company intends to expand its offerings in emerging defence domains, including unmanned systems, artificial intelligence (AI) - enabled testing, radar simulation, radio frequency (RF) subsystems, and space mission support. It plans to continue investing in internal technology development with the objective of developing market-ready products and subsystems for applications across multiple domains such as air, land, sea, and space. It also intends to strengthen its in-house electronic manufacturing and subsystem capabilities, with a particular focus on RF and embedded modules. This is expected to reduce dependence on external vendors, improve cost competitiveness, and allow greater control over quality and delivery schedules. These capabilities may enable it to participate in larger system integration programmes in the future.