MTAR Technologies IPO comprises a fresh issue of 21,48,149 equity shares by the company and an offer for sale of 82,24,270 equity shares by promoters and investors. MTAR Technologies is a leading player in the precision engineering industry and is engaged in the manufacture of mission critical precision components. It primarily serves customers in the clean energy, nuclear, space and defence sectors.
MTAR Technologies IPO Details
|Issue opens||Wed, 3rd March, 2021*|
|Issue closes||Fri, 5th March, 2021|
|Issue Details||Total offer of upto 10,372,419 Equity Shares|
|(Fresh Issue upto 2,148,149 Equity Shares & OFS upto 8,224,270 Equity Shares)|
|Issue Size (₹ Cr)||₹ 596 Cr|
|Price Band||₹ 574 – 575|
|Bid Lot||26 Shares|
|Issue Structure :|
|QIB||50% of the offer|
|NIB||15% of the offer|
|Retail||35% of the offer ( ~ 3,630,346 Equity Shares, ₹ 209 Cr)|
|BRLMs||JM Financial, IIFL Securities|
|Registrar||KFin Technologies Pvt. Ltd.|
- ANCHOR ISSUE: According to merchant banking sources, there was heavy demand of Rs 3,000 crore plus for the anchor potion of Rs 179 crore. Overall, 25 bidders participated but shares were allocated only to 15. The FPIs included Nomura Funds Ireland Public Limited Company, Jupiter South Asia Investment Company, White Oak Capital and Goldman Sachs India. The domestic institutional investors who were allocated shares are SBI Mutual Fund (MF), Axis MF, ICICI Prudential MF, HDFC MF, Birla Sunlife MF, Kotak Mahindra MF, Nippon India MF, Franklin Templeton MF, Sundaram MF, Invesco MF and Birla Sun Life Insurance.
About MTAR Technologies Limited
- MTAR Technologies Limited is a precision engineering solutions company engaged in the manufacture of mission critical precision components with close tolerances (5-10 microns), and in critical assemblies, to serve projects of high national importance, through precision machining, assembly, testing, quality control, and specialized fabrication competencies.
- The company has also developed import substitutes such as ball screws and water-lubricated bearings that have specialized applications.
- Company operates through 7 manufacturing facilities which are situated in Hyderabad, Telangana.
- Company is in the process of establishing an additional manufacturing facility at Adibatla in Hyderabad which shall be a sheet metal facility and shall allow us to undertake sheet metal jobs for Bloom Energy, ISRO and certain other customers.
- Company is also planning to construct an additional shed for specialized fabrication to supply products to domestic as well as international customers
- The company intends to use IPO proceeds for repayment of debt of around Rs 48 core, financing the project cost for establishment of a new manufacturing facility in Telangana and upgradation of the existing manufacturing facility
- The new facility in Telangana) will have a total estimated installed capacity of 51,943 tonnes per annum. The production at this new plant is likely to commence in FY21.
- As on December 31, 2020, it had 891 permanent employees and 248 contractual workmen.
MTAR Technologies IPO: Financials
|Revenue from Operations||177.27||152.18||213.77||183.67||159.6|
|Revenue Growth (%)||16.49%||–||16.39%||15.08%||–|
|EBITDA as stated||53.75||44.59||62.33||55.96||32.82|
|EBITDA (%) as stated||30.20%||29.08%||28.57%||30.10%||20.44%|
|Profit Before Tax||39.6||32.76||45.53||41.56||17.16|
|Net Profit for the period||28.07||22.45||31.32||39.2||5.42|
|Net Profit (% )||15.83%||14.75%||14.65%||21.34%||3.40%|
|Equity Share Capital||26.76||28.21||26.76||28.21||28.21|
|Reserves as stated||218.86||211.04||198.32||206.77||177.31|
|Net worth as stated||245.62||239.26||225.08||234.98||205.52|
|Debt Equity Ratio||0.27||0.07||0.13||0.12||0.1|
|EPS (₹ )||10.49||7.96||11.11||13.89||1.92|
|Equity Post IPO||30.76|
|EPS (Post IPO) FY20||10.18|
|EPS ann on sep’218mF21||12.17|
|PE ann 9mFY21||47.26|
- Track record of consistent growth in a fast growing industry with significant entry barriers
- Precision engineering expertise with complex product manufacturing capability
- Wide product portfolio leading to long-standing relationships with our customers
- Modern technology at our state-of-the-art manufacturing facilities
- Strong and diversified supplier base for sourcing of raw materials
- Track record of growth in financial performance
- Experienced and qualified management team
- Competition: As per CRISIL Report, its competitors in nuclear sector are Larsen & Toubro Heavy Engineering and Godrej & Boyce Manufacturing Company Limited and in the space and defence sectors are Larsen & Toubro, Godrej & Boyce Manufacturing Company Limited, Hindustan Aeronautics Limited, and Walchandnagar Industries.
- MTAR Technologies Limited owns a large range of equipment, resulting in increased fixed costs to the Company.
- Security breach in classified government systems could adversely affect its business.
This consisted issue of 1,851,851 Equity Shares comprising of (i) Private placement of 425,926 Equity Shares to SBI Magnum Global Fund,
425,926 Equity Shares to SBI Contra Fund and 444,444 Equity Shares to SBI Small Cap Fund, at a price of ₹ 540.00 per Equity Share aggregating to ₹ 700.00 million (ii) private placement of 12,963 Equity Shares to Axis Regular Saver Fund, 444,444 Equity Shares to Axis Small Cap Fund and 98,148 to Axis Children’s Gift Fund for cash, at a price of ₹ 540.00 per equity share aggregating to ₹ 300.00 million,
MTAR Technologies IPO: Assessment
- As on December 31, 2020, Company’s aggregate Order Book was ₹ 3,361.91 million, comprising Order Book in the clean energy sector, the nuclear sector and the space and defense sectors, of ₹ 801.86 million, ₹ 931.86 million and ₹ 1,606.10 million, respectively.
- The Order Book has grown at ~30% CAGR from Rs 2,019 million in FY18 to Rs 3,451 million in fiscal FY20.
- MTAR Technologies Limited has grown steadily in the last few years. Its total income and restated profit for the year have increased from ₹ 1,605.45 million and ₹ 54.23 million in Fiscal 2018, to ₹ 2,181.42 million and ₹ 313.18 million in Fiscal 2020, at a CAGR of 16.56% and 140.31%, respectively.
- Company currently has a credit rating of ‘BBB+ (Stable)’ for long term fund based / cash credit facilities, long term fund based term loans, and long term unallocated facilities and a credit rating of ‘BBB+ (Stable) / A2’ for long term / short term non fund based facilities from ICRA.
- The company has done well in Exports with more than 50% export earnings coupled with good margins.
- The company intends to use IPO proceeds for repayment of debt of around Rs 48 core, financing the project cost for establishment of a new manufacturing facility in Telangana and upgradation of the existing manufacturing facility.
- The Govt’s policy to construct 10 units of nuclear reactors will increase opportunities for domestic companies like MTAR.
- MTAR Technologies Limited is also likely to benefit from large refurbishment and maintenance market.
- Over the next five years, the private sector will receive the mandate for majority of upcoming space missions of ISRO which is positive for MTAR.
- MTAR will start manufacturing Hydrogen boxes and electrolyzers for Bloom Energy, which happens to be a key player in fuel cell technology.
- The nature of its products and the sectors which it caters to demand high and exacting standards for product quality as well as delivery schedules. Company seems to have capabilities to meet such dead lines, precision and product quality.
- At the upper price band of Rs.575, MTAR is available at a P/E of 47.3x (annualized basis on 9mFY21E EPS), on post-issue fully diluted equity capital, which is rather aggressively priced.
- There are no listed peers. Company stock can enjoy a positive sentiment due to presence in niche product segments and a good sentiment in the space & Defence sectors on account of Make in India.
- I intend to apply in MTAR Technologies IPO. The MTAR Technologies Limited IPO though expensive seems to have merits and some signs of evolving to a strong player in some key segments. Further company has demonstrated strong revenue and improved margins in the last few years.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.