The IPO of precision engineering solutions company MTAR Technologies opened today. As of 11:50 am, the issue was 1.14 times subscribed. The price band has been fixed at ₹574-575 per equity share for the initial share-sale and the issue would be open for public subscription during March 3-5. Ahead of the IPO, MTAR Technologies had raised ₹179 crore from anchor investors. Nomura, White Oak Capital and Goldman Sachs are foreign portfolio investors that have been allocated shares in the anchor book. In addition, domestic institutional investors who were allocated shares include SBI Mutual Fund (MF), Axis MF, ICICI Prudential MF and HDFC MF.
Here are 10 things to know about MTAR Technologies IPO:
1) KFin Technologies Private Limited is the registrar of MTAR Technologies IPO. The share allotment is likely to be finalised on March 10 and listing is likely on March 16, say analysts.
2) “Owing to current bull market sentiments and unique business, high operating and net margins, supportive government initiatives there is a huge fancy for MTAR Tech IPO. Grey market last heard for MTAR Tech was ₹450. From the trend, it seems that market is expecting almost 70-80% gains on listing,” says grey-market tracker Abhay Doshi, who is the founder of UnlistedArena.com, which deals in pre-IPO and unlisted shares.
3) The IPO consists of a fresh issuance of up to 21,48,149 equity shares aggregating ₹124 crore and an offer for sale of up to 82,24,270 equity shares worth up to ₹473 crore by selling shareholders.
4) “MTAR is a precision engineering solutions company with presence in the nuclear, defence and space and clean energy sectors. Backed by growing demand and rising investment in these sectors, the demand for precision engineering products is expected to rise steadily in the upcoming years. Also government’s efforts to boost manufacturing sector and make in India campaign will drive growth,” says Nirali Shah, Head of Equity Research, Samco Securities.
5) “Overall the company has a good financial track record with a debt to equity ratio of 0.13 only. On the risks front, the company derives over 80% of its revenue from its top 3 customers. Over all MTAR is overpriced at a FY20 P/E of 57.5 times. But it has been commanding a good grey market premium, indicating the offer will sail through. Keeping the risks in mind, we recommend to subscribe to this IPO for listing gains,” she added.
During FY18-20, MTAR’s revenue grew at a 16.8% CAGR to Rs. 214 cr in FY20. Over the same period, its EBITDA grew at a CAGR of 34.9% to Rs. 58 cr in FY20 while the net profit grew at a CAGR of 140.3% to Rs. 31 cr in FY20.
6) Religare Broking in a note said: “The financial performance has been encouraging for the company to register net sales and profit CAGR of 16% and 140% over FY18-20. On the valuation front, the company is richly valued at 52 time FY20 EPS. From a long-term perspective, investors can consider applying for the IPO.”
7) JM Financial and IIFL Securities are the book running lead managers to the issue.
8) Proceeds from the fresh issue will be used to repay debt, fund long-term working capital requirements besides attending to general corporate purpose.
9) MTAR currently operates out of seven manufacturing facilities, including an export-oriented unit located in Hyderabad, and has been servicing the defense, aerospace and energy sectors for more than four decades.
10) The company works with clients like Indian Space Research Organization, Defence Research and Development Organization, Nuclear Power Corporation of India Ltd and US-based Bloom Energy Corp, besides catering to other well-known establishments like Bharat Dynamics and Hindustan Aeronautics.