MTAR IPO - SHOULD YOU SUBSCRIBE?
WIREMESH | IPO |
MTAR is looking to raise up to Rs 596.41 crore through a combination of fresh issue of shares worth Rs 123.51 crore and an offer for sale of Rs 472.90 crore On Tuesday, the company raised Rs 178.92 crore from 15 anchor investors at Rs 575 per share, including Nomura Funds Ireland, Jupiter South Asia Investment, White Oak White Oak Capital and Goldman Sachs India.
MTAR Technologies is a Hyderabad based precision engineering company, the company manufactures critical and differentiated engineered products & primarily serves customers in the nuclear, space and defence, and clean energy sectors. MTAR plans to utilize the money raised for repayment of the borrowings, to fund the working capital requirements and for general purposes.
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 defense. The company is also working with Israel- based Rafael Advanced Defense Systems and Elbit Systems on the exports front. As of December 31, MTAR's major product portfolio included three kinds of products in the clean energy sector, 14 kinds of products in the nuclear sector, and six kinds of products in the space and defence sectors.
MTAR Technologies’ revenue grew at a CAGR of 17 per cent while PAT grew by 140 per cent CAGR in the past three years. The company has a diversified portfolio with an aggregate order book of Rs 336.2 crore as on December 31, 2020, which is at 1.7x its FY20 revenues. it has grown at 16.5 per cent CAGR over the last 3 years at the topline, while its EBITDA margins were at 28.5 per cent in FY20. This numbers come at a time when the government has been cutting down on the defence budget, MTAR had a net margin of 14 per cent at the end of FY20. For financial years, ended 2018, 2019 and 2020, the return on capital employed was 9.59 per cent, 16.96 per cent and 19.78 per cent, respectively. Further, the debt-equity ratio was at 0.13 and 0.27 for March 31, 2020 and December 31, 2020, respectively, against 0.07 as on December 31, 2019, 0.12 as on March 31, 2019.
The Indian Government is planning to construct 10 units of nuclear reactors as a single project and this should be a great opportunity for domestic suppliers. It is also expected that within 5 years private players could get the mandate for nearly 70% off all space missions. MTAR could be one of the major beneficiaries of these policies.
MTAR’s major competition comes from L&T Heavy Engineering, Godrej & Boyce Manufacturing Company, HAL and Walchandnagar Industries in the nuclear and space and defence sector. The company is over reliant on its top 3 customers and 80% of its revenue comes from them.
The IPO is aggressively priced, but the premium could well be justified considering its healthy order book, visibility of top line growth, competitive edge, superior profitability as compared to peers, return ratios, wide clientele spread across the globe, sound R&D base and technological progress. The grey market premium was at Rs 450 as of 4th March and investors could well be looking at a 70% premium on listing day. We recommend subscription for listing gains