MTAR Technologies IPO: Issue details, valuation, business model
Engineering company MTAR Technologies is floating its maiden public issue of equity shares on March 3 and the IPO will close on March 5. The nearly Rs 600-crore fund raising happens at a time when the market is going thorugh a consolidation. That means there could be an opportunity to make a long-term investment in the IPO shares if they are priced right. To know more details, read on.
About the IPO issue
MTAR Technologies is offering up to 10,372,419 equity shares. This comprises fresh issue of upto 2,148,149 equity shares and an offer-for-sale of up to 8,224,270 equity shares.
Based on the upper end of the price band of Rs 574-575 per share, MTAR Technologies is seen raising Rs 596.41 crore. The face value of each share is Rs 10.
The minimum bid lot is of 26 shares, which means a minimum investment of Rs 14,950 at upper price band of IPO.
Post issue the implied market cap of MTAR Technologies will be Rs 1,766 crore to Rs 1,769 crore based on the IPO price alone. If the stock lists at a premium/discount, actual market cap will vary.
The issue’s book running lead managers are JM Financial, IIFL Securities.
The registrar is KFin Technologies.
About the company
MTAR Technologies is a leading precision engineering solutions company. It is engaged in the manufacture of mission critical precision components with close tolerances (5-10 microns), and in critical assemblies. The projects it works on primarily serve customers in the nuclear, space & defence, and clean energy sectors.
MTAR Technologies lays special emphasis on research and development (R&D) of their manufacturing processes.
The company has an order book of Rs 336 crore out of which half is in the space and defence sector while the rest is in clean energy and in the nuclear sector.
The company focuses on clean energy as one of its key customer sectors and are accordingly, involved in the manufacture of power units, specifically hot boxes, and in the development and manufacture of hydrogen boxes and electrolyzers, to serve Bloom Energy Inc., United States (“Bloom Energyâ€) with which, company has been associated with for over nine years, as per Kotak Securities.
The company has been serving customers in the nuclear sector for over 35 years, and has established relationships with the Nuclear Power Corporation of India Limited (“NPCILâ€) having served them for over 16 years. Also, the company has been a key supplier of mission critical assemblies and components to customers within the space and defence sectors for their programs of national importance. Through its long-standing relationships of over three decades and four decades with customers such as the Indian Space Research Organisation (“ISROâ€) and the Defence Research and Development Organisation (“DRDOâ€), the company has been able to supply specialized products to the Indian space programme and the Indian missile programme, respectively.
The company has grown at 16.5% CAGR over the last three years at the topline, while its EBITDA margins were reported at 28.5% in FY2020. The company has consistently delivered profits at the bottom line, with net margins at 14% in the last fiscal. It has a significant interest coverage ratio and the lowest gearing ratio in the industry.
Subbu Venkata Rama Behara is the Chairman of the Board, and an Independent Director of the company. Parvat Srinivas Reddy is the Managing Director of the company. Devesh Dhar Dwivedi is the Chief Operating Officer of the company. Sudipto Bhattacharya is the Chief Financial Officer of the company.
Outlook and valuation
Taking cognisance of the huge growth opportunities for MTAR and a high margin business that would aid flow of profitability to the bottomline, ICICI Securities recommends SUBSCRIBE rating on the issue. The company is available at a P/E of 56.5 times (post issue basis) on FY20 PAT.
The stock’s current P/B ratio stood at 4.8 based on December 31, 2020 figures.
| IPO factbox | |
| Company | MTAR Technologies |
| Open date | Mar. 3 |
| Close date | Mar. 5 |
| Allotment date | Mar. 10 |
| Listing date | Mar. 16 |
| IPO size | ₹596 crore approx. |
| IPO band | ₹574-575 per share |
| Applications | Compulsorily in ASBA mode |
| Bid lot | 26 shares |
| Registrar | KFin Technologies |
