MSTC’s IPO comprises an Offer For Sale (OFS) of 1.76 crore shares which amounts to 25 per cent of total paid-up equity, by the Government of India, acting through the Ministry of Steel. The company has fixed the price band of Rs 121–128, and intends to offload 1.76 crore shares through the IPO. MSTC IPO plans raise Rs 226 crore at the upper price end.
| Issue Period | Issue Opens On: Wed, March 13- March 15, 2019 |
| Issue Details | OFS 17,670,400 Equity Shares |
| Issue Size (Rs. Cr) | Rs.225.17 Cr |
| Price Band | Rs.121 – 128 |
| Bid Lot | 90 Equity Shares and multiple thereof |
| Employee Reservation | 70,400 Equity Shares |
| Retail and Employee Discount | Rs.5.50 per Equity Shares |
| Issue Structure : | |
| QIB | 75% of the Net offer |
| NIB | 15% of the Net offer |
| Retail | 10% of Net offer (upto 1,760,000 Shares, 20.33 Cr) |
| BRLMs | Equirus Capital |
| Registrar | Alankit Assignments Ltd |
About MSTC Limited
- MSTC Limited (formerly known as Metal Scrap Trade Corporation Limited) is a CPSE (central pulblic sector enterprise) e-commerce company based in Kolkata, West Bengal.
- MSTC is under the administrative control of Ministry of Steel, Govt. of India. Govt. of India holds 89.85% share and 10.15% share is held by the members of Steel Furnace Association of India and Ispat Industries Limited.
- MSTC has 3 main business verticals in the Company namely, (i) E-commerce, (ii) Trading, and (iii) Recycling done through Mahindra MSTC Recycling Pvt. Ltd. (“MMRPL”).
- MSTC is a pioneer in the e-auction segment catering to the Government sector, partnering with different Government agencies and ministries in conducting e-Auctions.
- MSTC is one of the key players offering comprehensive range of services in e-procurement segment.
- It is a Miniratna Category-I public sector undertaking, owned and operated by the Government of India with Profit Before Tax of INR 111.59 crore for fiscal year 2017-18. Incorporated on 9 September, 1964, MSTC has 326 employees (as on 31st March 2018).
- MSTC renders service to various e-commerce sectors, including e-auction, e-procurement, high sea sales, e-sales, and retail software. MSTC recently developed software to conduct online draw for new LPG distribution ship scheme which was conducted by state run oil marketing companies all over India.
- The company has its head office in Kolkata, West Bengal; four regional offices in Kolkata, Delhi, Mumbai and Chennai; and branch offices in Chandigarh, Jaipur, Vadodara, Bhopal, Bhubaneswar, Guwahati, Bangalore, Lucknow, Ranchi, Raipur, Vijaywada, Trichy, Vizag, and Hyderabad. MSTC has recently opened two new site office at Patna and Dehradun. It also has a subsidiary PSU company, FSNL (Ferro Scrap Nigam Limited).
MSTC Limited: Financials
| (Rs. In Cr) | ||||
| Particulars | HY2019 | Fy18 | Fy17 | Fy16 |
| Revenue from Operations | 1,476.91 | 2,265.40 | 1,739.22 | 3,225.16 |
| Revenue Growth (%) | – | 30.25% | -46.07% | – |
| EBDITA | 80.3 | 113.2 | 262.64 | -85.35 |
| EBDITA (%) | 5.38% | 4.05% | 13.99% | -2.58% |
| Profit Before Tax | 40.47 | 33.45 | 182.79 | -194.34 |
| Profit After Tax | -15.88 | -6.48 | 139.15 | -247.1 |
| Net Profit Margin | -1.08% | -0.29% | 8.00% | -7.66% |
| Share Capital | 35.2 | 35.2 | 17.6 | 8.8 |
| Reserves | 292.72 | 330.96 | 388.43 | 305.87 |
| Net worth | 327.92 | 366.16 | 406.03 | 314.67 |
| Long Term Borrowings | 3.34 | – | – | – |
| Short Term Borrowings | 298.6 | 766.18 | 688.35 | 653.33 |
| EPS (Rs.) | -2.26 | -0.92 | 19.77 | -35.1 |
| RONW(%) | -4.84% | -1.77% | 34.27% | -78.53% |
| NAV (Rs.) | 46.58 | 52.01 | 57.67 | 44.7 |
MSTC IPO : Assessment
- MSTC has conducted more than 1.90 lakh auctions and is the preferred service provider for various government and government-controlled entities.
- The Company has incurred loss after tax . These losses primarily stem from writing off bad debts and provisioning done for both bad / doubtful advances and debts.
- PSU stocks have been commanding low premium. Most recent listings have bombed on the stock exchanges.
- At a NAV of Rs 46.58, MSTC IPO is valued at about at 2.75x its book value.
- MSTC generates most of its revenues from the contracts awarded by Govt companies on preferential basis. For the HY FY19 MSTC such orders constituted 90.58% of total revenue from e-commerce segment. There could be change in Govt. policies in this respect on future.
- Even with retail discount of Rs. 5.5, it is difficult to say if there will be gain on Listing.
- on Day 2 the issue has been oversubscribed 12%, while retail portion has been fully subscribed.
- It is gathered that there no activity in Grey Market for MSTC IPO
- I intend to give this IPO a miss due to my perception of unfavorable risk-reward in CPSE IPOs.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.