Apollo Micro Systems Shares Drop on Rs 3,322 Crore Fund Raise

The Apollo Micro Systems board approved a ₹3,322 crore capital raise on Monday night, the company’s biggest single fundraising yet, and the stock dropped nearly 6% on Tuesday as investors weighed the dilution. The issue is a two-tranche preferential package of up to 2.28 crore equity shares at ₹416.60 each, allotted to 55 named investors, and up to 5.69 crore convertible warrants at the same price, allotted to 93 named subscribers. Tata Mutual Fund and Saint Capital Fund are among the equity allottees, while members of the promoter family have taken the bulk of the warrant book. Shareholders vote on the deal at an August 4 EGM.

The dilution is what sent the stock lower. The ₹416.60 price (a ₹415.60 premium over the ₹1 face value) sits above where the stock was trading before the announcement, but each warrant can convert into a fresh share within 12 months, meaning more equity hits the register over the next year if the allottees choose to convert. The company needs the money to chase defence orders, and the Defence Acquisition Council has just opened a Rs 52,000 crore DAC procurement window.

By the numbers:

• ₹3,322 crore: total size of the preferential issue
• ₹951.14 crore: equity share tranche at ₹416.60 each, to 55 named investors
• ₹2,371.09 crore: convertible warrant tranche at ₹416.60 each, to 93 named subscribers
• 2.28 crore equity shares plus 5.69 crore warrants, all of face value ₹1
• ~6%: Apollo Micro Systems’ share price decline on July 7

What the Board Just Approved

The board filed the plan with the exchanges on Monday after market hours, listing it as a single fundraising decision split across two instruments. The equity tranche is up to 2.28 crore shares at ₹416.60 each (a ₹415.60 premium over the ₹1 face value), aggregating to roughly ₹951.14 crore. The warrant tranche is up to 5.69 crore instruments at the same ₹416.60 price, aggregating to up to ₹2,371.09 crore on conversion.

To make room for the new paper, the board has also approved lifting the company’s authorised share capital from ₹45 crore to ₹63 crore, creating 18 crore new ₹1 shares that rank pari passu with the existing equity. Both tranches carry the same per-unit price, but the warrant tranche carries the dilution risk one year out, not on day one.

Who Is Writing the Cheques

This is a closed preferential allotment, not a follow-on public offer, so the order book is short and named. Among the equity tranche allottees, the Rs 3,322 crore preferential issue plan lists Saint Capital Fund with 50 lakh shares and Tata Mutual Fund with 12 lakh shares. The remaining equity allocation goes to other selected investors.

The promoter family has the largest single warrant holding. Chanakya Reddy Baddam and Kanishka Reddy Baddam together have been allotted 2.61 crore of the 5.69 crore warrants on issue, with the balance of the warrant book allocated across other identified subscribers.

Named parties in the filing include:

• Saint Capital Fund: 50 lakh equity shares
• Tata Mutual Fund: 12 lakh equity shares
• Chanakya Reddy Baddam: warrants (promoter family)
• Kanishka Reddy Baddam: warrants (promoter family)
• Other identified non-promoter investors: balance of the equity and warrant books

The warrants are earmarked for members of the promoter group and certain identified non-promoter investors, the Financial Express reported. The full allotment list, with share and warrant counts for each named party, sits on the company’s exchange filings. Members of the promoter group taking down the warrants include the Baddam family, the largest single insider block on the company cap table.

The Trigger for the Drop

Apollo Micro Systems shares dropped sharply on the day the deal hit the tape. CNBC TV18 reported the stock trading 4.6% lower at ₹404.25 by 9.50 am on July 7, putting the day’s decline close to 6% intraday, while the Financial Express pegged the intraday plunge at 5.14% and Business Today noted the previous session closed 5.75% lower at ₹424.05.

The market is pricing in dilution, and on past numbers the dilution is real: the 2.28 crore new shares alone expand the equity base materially, and each warrant adds another potential share within 12 months. The Financial Express notes the stock has surged 103.59% in the last three months and gained 45.49% on a year-to-date basis. Business Today puts the three-year return at 785%, the two-year return at 298%, and the five-year return at 3,632%. The fall is a non-trivial reset on a multibagger defence stock that hit fresh highs in the recent past.

Shareholders reading the announcement on screen will see the share count change by the size of the new paper. The 2.28 crore equity shares land in the demat account immediately; the 5.69 crore warrants add a further set of potential conversions over the next year. That gap between the headcount on day one and the headcount 12 months out is what the share price was reacting to.

The way the pricing reads on the tape: the issue price of ₹416.60 is fixed against the volume-weighted average from the recent trading window, which is the floor price regulators require for a preferential issue. Above that floor the promoter family and the 55 named equity investors have signed up, but below it the market has re-rated the existing float.

The Defence Pipeline Behind the Cash

The fundraise lands four days after the Defence Acquisition Council, chaired by Defence Minister Rajnath Singh, cleared ₹52,000 crore of capital acquisition proposals for the Indian Army, Navy and Air Force on July 3. Apollo Micro Systems is among the companies the council has identified as a likely beneficiary. The Economic Times details ten systems approved, ranging from anti-drone electronics to naval mines to high-altitude pseudo-satellites.

For the Indian Army, the Acceptance of Necessity covers the AKASH TARANG Anti-UAV Electronic Warfare System, designed to protect formations against hostile drones, and the Man Portable Anti-Tank Guided Missile (MPATGM), intended to counter enemy armoured vehicles.

The Medium Range Surface-to-Air Missile (MRSAM) system, the Very Short Range Air Defence System (V-SHORADS) with multi-spectral sensing, an Active Protection System for tanks, and a Jet-Based Kamikaze Drone System round out the Army’s slice. The Navy is cleared to procure Multi-Influence Ground Mines (MIGM), Naval Shipborne Unmanned Aerial Systems (NSUAS), and a Land Based Testing Facility for electric propulsion motors. The Air Force has been cleared for Fixed-Wing Based High Altitude Pseudo Satellites (FW-HAPS).

The Mechanics of the Warrants

Each warrant is convertible into one equity share of face value ₹1 within 12 months from the date of allotment. Investors must pay 25% of the issue price up front at the time of issue, with the remaining 75% due on conversion.

To issue up to 5,69,15,380 (Five Crores Sixty Nine Lakhs Fifteen Thousand Three Hundred and Eighty Only) convertible equity warrants of the Company each convertible into, or exchangeable for, one Equity Share of Face Value Rs 1/- (Rupee One only) each within the period of 12 (Twelve Months) in accordance with the applicable law (Warrants) at a price of Rs 416.60.

Apollo Micro Systems, in the regulatory filing quoted by Business Today.

The arithmetic back to the headline number is clean: 5.69 crore warrants at ₹416.60 each equals ₹2,371.09 crore on full subscription, with investors required to remit roughly a quarter of the issue price on day one. Premium per share works out to ₹415.60 on the ₹1 face value, set against closing prices Apollo Micro Systems has printed in the recent past.

The allotment skews heavily promoter. With the Baddam family taking 2.61 crore of the 5.69 crore warrants on issue, the promoter group is the largest single block in the warrant book. The 25% upfront commitment from the promoter family alone would clear roughly ₹271.6 crore on the table by the allotment date, before any non-promoter warrant holders are counted. That capital deployment from insiders sits alongside the open market re-rating as a leading signal of how the company expects to deploy the raised capital against the defence order cycle opening in front of it.

Outside the warrants, the equity shares carry no conversion mechanic. Once allotted, they sit in the holder’s demat account as ordinary equity with full dividend and voting rights from the date of allotment onward. The premium of ₹415.60 above the ₹1 face value is what gives the issue its headline price of ₹416.60, the same figure used for the warrants, with the floor price set against the recent trading-window VWAP as required under the SEBI preferential-issue framework.

How Existing Shareholders Get a Vote

The preferential issue cannot proceed without shareholder approval. Apollo Micro Systems has called an extraordinary general meeting for August 4, 2026, to be held via video conferencing and other audio-visual means. The cut-off date for determining voting eligibility is July 28, so shareholders on the register at that date get a vote.

The notice packs in four separate resolutions beyond the preferential issue itself: the increase in authorised share capital from ₹45 crore to ₹63 crore; an increase in borrowing limits under the Companies Act; the creation of security for those borrowings; and the authority to give loans, guarantees and investments under the applicable provisions of the law. Each item is a stand-alone vote, and failure of any one of them puts the broader package on hold. That is why the board is taking shareholder consent on each leg separately rather than bundling them into a single ordinary resolution. Failure of the borrowing-limit or the loans-and-guarantees resolution is the cleanest way for the rest of the package to lapse without the company having to call a second EGM.

Frequently Asked Questions

Who is Apollo Micro Systems?

Apollo Micro Systems is a Hyderabad-based defence and aerospace company that designs, develops, assembles and tests custom-built electronic and electro-mechanical solutions for mission-critical applications. Its customer base spans the defence, aerospace, space, homeland security, railways, automotive and infrastructure sectors, with strategic support to the Indian Armed Forces, DRDO and defence public sector undertakings.

How will Apollo Micro Systems use the Rs 3,322 crore?

The filing does not specify an end-use, but the timing aligns with the Defence Acquisition Council’s July 3, 2026 clearance of ₹52,000 crore in procurement proposals. The capital positions the company to participate in those programmes as a likely supplier of defence electronics.

What did the Defence Acquisition Council clear?

The DAC, chaired by Defence Minister Rajnath Singh, granted Acceptance of Necessity on July 3, 2026 for ten systems worth about ₹52,000 crore in total. The list covers Army anti-drone and air defence systems, naval mines and shipborne UAVs, and an Air Force high-altitude pseudo-satellite, among others.

How do the convertible warrants work?

Each warrant gives the holder the right to subscribe to one equity share of face value ₹1, exercisable within 12 months from the date of allotment. Holders pay 25% of the issue price upfront and the remaining 75% on conversion, which means the warrant book carries dilution risk one year out rather than on day one.

When is the EGM and who can vote?

The extraordinary general meeting is on August 4, 2026, held via video conferencing. The record date is July 28, 2026, so shareholders whose names appear on the register on that date are eligible to vote on the preferential issue and the four related resolutions.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Investments in equity shares and convertible warrants carry risk, including the risk of partial or total loss of capital. Readers are advised to consult a qualified financial advisor before making any investment decision. Figures quoted are accurate as of publication on July 7, 2026.