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The 9th IPO so far in the calendar year 2021 is here! MTAR Technologies Ltd. will launch its Rs 560-crore initial public offering on March 3, 2021 as the defence equipment maker plans to repay borrowings.
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Also Read : How to Apply for IPO online (step by step guide)
Incorporated in 1999, MTAR Technologies is a leading national player in the precision engineering industry. The company is primarily engaged in the manufacturing of mission-critical precision components with close tolerance and in critical assemblies through its precision machining, assembly, specialized fabrication, testing, and quality control processes.
The company co-develops critical sub-systems like Liquid propulsion Rocket Engines, Cryogenic Engines and other parts for space programs like Chandrayan-II, Mangalyaan and Agni missile programmes.
Currently, the firm has 7 state-of-the-art manufacturing facilities in Hyderabad, Telangana that undertake precision machining, assembly, specialized fabrication, brazing and heat treatment, testing and quality control, and other specialized processes.
2) IPO Details:
MTAR plans to raise Rs 597 crore from the primary market. This includes a fresh issue of shares worth Rs 124 crore ( 21.48 lakh shares) and an offer for sale of Rs 473 crore (82.24 crore shares) worth of shares. The company has already undertaken a pre-IPO placement of 1,851,851 shares, aggregating to Rs 100 crore with Axis MF and SBI MF.
IPO Date: Mar 03, 2021 - Mar 05, 2021
Face Value: ₹10 per equity share
IPO Price: ₹574 to ₹575 per equity share
Market Lot: 26 Shares
Listing At: BSE, NSE
Finalisation of Basis of Allotment: Mar 10, 2021
Initiation of Refunds: Mar 12, 2021
Credit of Shares to Demat Acct: Mar 15, 2021
IPO Shares Listing Date: Mar 16, 2021
3) Business & Order Book
The company manufactures high precision components, sub-systems, assemblies having components with close tolerances (5-10 micron) to serve projects in the clean energy, nuclear sector, space and defence. MTAR has seven manufacturing units, including an export oriented unit that supplies power units to Bloom Energy, and high-end components to an Israeli defence technology company.
The company has three key customers in the fuel cell, nuclear, and space and defence segments.
- In the fuel cell segment, Bloom Energy is its largest customer that accounted for 49% of the company’s revenue in the nine months ended December 2020.
- Its key customer in the nuclear segment, Nuclear Power Corporation of India Ltd., accounts for 27% of the overall revenue.
- In the space and defence segment, clients such as the Indian Space Research Organisation and Defence Research and Development Organisation account for 21% of the top line.
Order Book: MTAR has an order book of Rs 334 crore across three segments, including Rs 160.60 crore for space and defence segment. It has an Rs 80.2-crore order book for the clean energy segment from Bloom Energy and Rs 93.2 crore from Nuclear Power Corp.
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MTAR has seen a compounded average revenue growth of 16% in the last three financial years. Its revenue for the fiscal ended March 2020 stood at Rs 213.8 crore, and at Rs 177.3 crore for the nine month ended December 2020.
The company’s Ebitda margin hovered between 29% and 30% in the last three financial years. It stood at 30% for the nine months ended December 2020.MTAR’s profit for 2019-20 stood at Rs 45.5 crore, and at Rs 39.6 crore for April-December 2020 period.
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At the upper price band of Rs 575, MTAR is available at a P/E of 47.3x (annualized basis on FY21E EPS of Rs 12.2), which is aggressively priced but there are no direct listed entities in India that are engaged in a similar line of business and whose business is comparable with that of this business.
6) Grey Market premium:
(As on Mar 02, 2021) The grey market premium of MTAR Technologies Limited shares is at 400 Rs. or 70% up from the IPO price.
7) Peer comparison:
MTAR competes with more than 200 vendors in the nuclear, space and defence segments. It has formidable competition from Mahindra Defence, Larsen & Toubro’s defence and heavy engineering segment, and Godrej & Boyce, among others.
The net proceed from the IPO will be used towards following purposes:
- To partly or fully repay company's borrowings.
- To finance company's working capital requirements.
- To meet general corporate purposes.
- Wide range of product portfolio.
- 7 Modern technology manufacturing units.
- Diversified supplier base.
- Strong financial track record.
- Experienced and qualified management.
- MTAR has been a key partner to Indian Space Research Organization (ISRO), Defense Research and Development Organization, Nuclear Power Corporation of India Limited (NPCIL) and the US-based Bloom Energy, besides catering to several large Indian entities such as Bharat Dynamics and Hindustan Aeronautics in aerospace and defence. The company is also working with Israel- based Rafael Advanced Defense Systems and Elbit Systems on the exports front.
- The company depends on Bloom Energy and a limited number of other clients for a significant portion of its revenue. It depends on NPCIL, ISRO and DRDO for more than 50% of its revenue.
- The company does not have long-term supply agreements with its customers.
- The company is in a highly competitive market where pricing pressure can adversely impact its Ebitda margin.
- The company does not have the intellectual property rights for fuel cells technology.
Apply for 'one lot' for decent a listing gains as well as for the long term investment.
Research Analyst (SEBI Regd.)
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