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IPO Analysis: MTAR Technologies

Ganesh V
/ Categories: Mindshare, IPO Analysis
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IPO Analysis: MTAR Technologies

IPO rating- Invest for listing gains 

About the issue 

MTAR Technologies is a precision engineering solutions company engaged in the manufacturing of mission-critical precision components. It serves customers in the clean energy, nuclear, space and defence sectors. Its major clients include ISRO, Rafael, DRDO and NPCIL. It is entering the capital market with its initial public offering (IPO) of equity shares of the face value of Rs 10 each. The price band of the issue has been fixed at Rs 574 to Rs 575 per equity share. The total number of shares for sale is 10,372,419. The opening date of the IPO is March 3, 2021, while its closing date is March 5, 2021. Out of the total shares, 50 per cent shall be available for allocation on a proportionate basis to qualified institutional buyers (QIBs). Further, not less than 15 per cent of the offer shall be available for non-institutional bidders and the rest for retail investors. A retail-individual investor can apply for up to 13 lots. The objectives of the offer are to partly or fully repay the company's borrowings, to finance the company's working capital requirements and also, to meet general corporate purposes. 

MTAR Technologies Ltd 

 

Issue open 

March 3, 2021 – March 5, 2021 

Issue type 

Book built issue IPO 

Issue size 

10,372,419 equity shares of Rs 10
(aggregating up to Rs 596.41 crore) 

Face value 

Rs 10 per equity share 

Issue price 

Rs 574-Rs 575 per equity share 

Market lot 

26 shares 

Min. order quantity 

26 shares 

Listing at 

BSE, NSE 

 

About the company 

MTAR Technologies is a leading player in the precision engineering industry. The company is primarily engaged in the manufacturing of precision components with close tolerance and in critical assemblies. Since its inception, MTAR Technologies has significantly expanded its product portfolio. A wide range of complex product portfolio meets the varied requirements of the Indian nuclear, defence, and space sector. ISRO, NPCIL, DRDO, Bloom Energy, Rafael, Elbit, etc. are some of the major clients. It has seven manufacturing units, including an export-oriented unit located in Hyderabad. The company’s strength lies in its engineering capabilities, which have enabled it to consistently offer quality complex precision manufactured assemblies and components to its customers. The company’s key portfolio comprises three kinds of products in the clean energy sector, 14 products in the nuclear sector and six products in the space & defence sectors. The company has built nuclear and pressurised water reactors, aerospace engines, missile systems, aircraft components and other such critical components & assemblies. The company has contributed to the Indian civilian nuclear power programme, Indian space programme, Indian Defence and aerospace sector, global defence and aerospace sector, as well as to the global clean energy sector. MTAR Technologies has a robust order book of over Rs 300 crore and they are expecting another Rs 200 crore of orders in Q4. The company is also in the process of setting up an additional facility at Adibatla (Telangana), which is expected to become operational soon. 

Strengths 

Experienced and qualified management. 

A leading player in its domain with a well-diverse product portfolio. 

Diversified supplier base for sourcing of raw materials.  

Precision engineering expertise with complex product manufacturing capability. 

Robust financial track record. 

Financials 

Its revenue has grown at a CAGR of 17.46 per cent in the last three years. EBITDA margins have improved from 23 per cent to 30 per cent in the last three years. PAT has grown from Rs 3 crore to Rs 28 crore. The company is almost debt-free. The company is generating free-cash-flow in the last three years. 

Particulars (crore) 

Mar 18 

Mar 19 

Mar 20 

6MFY21 

Sales 

159 

185 

218 

122 

Cost of material consumed 

65 

65 

87 

52 

Gross margins (per cent) 

59 

65 

60 

57 

Change in inventory 

-9 

-2 

-15 

-1 

Employee benefit expense 

44 

43 

51 

23 

Other expenses 

23 

23 

32 

11 

Operating profit 

36 

56 

63 

37 

OPM (per cent) 

23 

30 

29 

30 

Other income 

Interest 

Depreciation 

11 

11 

12 

Profit after tax 

40 

28 

20 

ROCE (per cent) 

22 

28 

32 

33 

 

Valuation & recommendation  

If we look at the price band of MTAR Technologies and calculate the P/E ratio at the higher price of Rs 575, then we would get a value of P/E ratio of 51. The company has a diverse and stable client base that provides the required stability. MTAR Technologies has been performing well on the financial front, and its operating margins are growing consistently. With the recent government initiatives such as 'Make in India', the country is aiming to become an exporter in the defence sector, rising budgetary allocations for defence and space sectors thereby, providing a great opportunity to the company. The company has a very good moat as getting projects in nuclear, defence and space, is very difficult for other companies. The government’s focus on space and defence will help the company to get more projects in future. It already has an order book of Rs 300 crore. Looking at the above positives, we believe that the company will keep growing its business at a healthy rate, and hence, you can invest for a listing gain. 

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