Astra Microwave shares surged 7 per cent on joint venture

The Shares of Astra Microwave Products (AMP), surged about 7 per cent on Monday (24th August) on Joint Venture (JV) with Rafael Advanced Defence Systems (RAFAEL). The stock closed at Rs 111.20 on Friday (21st August) and touched a day high of Rs 118.70 on Monday in the Bombay Stock Exchange (BSE).

AMP has informed BSE that the Company have signed a Term Sheet for formation of JV with RAFAEL, for joint production and supply of Tactical Radio Communication systems, Electronic war-fare systems and Signal intelligence systems. The JV will operate from Hyderabad and is expected to start business development activities in the first half of 2016.

AMP is expected to invest about USD 20 million in the first two years in the JV and the JV will share ownership in the ratio of 51:49, which will become 50:50 subject to regulatory approvals.

AMP is engaged in designing and manufacturing of radio frequency (RF) and microwave super components and sub-systems finding applications in defense, space and civil communication systems. Its telecom products include global system for mobile (GSM), code division multiple access (CDMA) repeaters, RF and optical mobile jammers, tower mounted amplifiers, tower mounted boosters and band pass and CDMA rejection filters.

RAFAEL is based in Haifa, Israel and was founded in 1948. It is Israel's second largest defense company, with 2013 sales of USD 2.047 Billion, an order backlog of USD 4.3 Billion and a net profit of USD 101 Million. It engages in research, design, development, manufacture, and supply of defense systems for land, sea, air, and space applications in Israel (Israeli Defense Forces and the defense establishment) as well as foreign customers around the world.

Earlier, AMP declared its June quarter results and the company reported a 74.33 per cent decline in its net profit to Rs 4.9 crore in Q1FY16 as compared to Rs 19.09 crore in Q1FY15. Mainly due to a 47.06 per cent year on year decline in revenue to Rs 99.45 crore in Q1FY16 against Rs 187.86 crore in Q1FY15. Its EBITDA margin contracted by 294 basis points to 13.47 per cent and PAT margin contracted by 523 basis points to 4.93 per cent during Q1FY16 compared to same period of last financial year.

AMP's shareholding pattern indicates that FII holdings expanded by 199 basis points to 2.13 per cent and DII holdings expanded by 276 basis points to 24.47 per cent during Q1FY16 as compared to the same period of last year.

We hope the JV with RAFAEL will give some breather to its investors and one can expect some improvement in its financial performance.