Last Updated on Dec 29, 2021 by Aradhana Gotur
In just 2 months of 2021, 8 IPOs have made it to the Indian stock markets. On 3rd Mar 2021, MTAR Technologies Ltd is set to join the pack. In this article, we analyse the company and its IPO to equip you with vital information needed to make informed investment decisions.
The article covers:
Timeline of MTAR Technologies Limited’s growth
Products of MTAR Technologies Ltd
Sectors serviced by MTAR Technologies
Clientele of MTAR Technologies Ltd
About MTAR Technologies Ltd IPO
Constituents and subscription of MTAR Technologies’ IPO
Book running lead managers and registrar of MTAR IPO
Purpose of MTAR Technologies Ltd IPO
Valuation of MTAR Technologies’ Ltd
Promoter holding of MTAR Technologies
Financials of MTAR Technologies Ltd
Strengths of MTAR Technologies Limited
Risks of MTAR Technologies Ltd
Table of Contents
About MTAR Technologies Ltd
Backed by Mathew Cyriac, the former co-head of private equity Blackstone, MTAR Technologies is a Hyderabad-based precision engineering solutions company. It manufactures nuclear, defence, and aerospace equipment, which are used in projects of high national importance.
Timeline of MTAR Technologies Limited’s growth
Here’s a snapshot of the various milestones achieved by the company:
1970: started as a partnership firm and established MTAR Unit 1 for BHEL orders
1972: received its first order from HMT
1975: started MTAR Unit 4 for Rough Machining Operations
1978: launched MTAR Unit 5, a Heat Treatment and Surface Treatment Plant
1983: began supplying components to ISRO
1985: started manufacturing ball screws
1986: entered manufacturing with DRDO as customer
1988: added HAL, GTRE, and ADA to its customer base
1989: supplied the First Vikas Engine, a liquid-fuelled rocket engine
1990: incorporated as a company
1999: started manufacturing Fin assembly, base shroud, and pneumatic components for Agni programs
2002: established MTAR Unit 2 for additional capacity for defence and space sectors
2008: started manufacturing grid plates for a 500 mega-watt Reactor
2010: established MTAR Unit 7, a 100% Export Oriented Unit
2011: commenced the manufacture of power units for Bloom Energy
2018: started exporting defence exports
2020: started developmental activity for roller screws, substitute for imported components
Products of MTAR Technologies Ltd
MTAR Technologies is involved in building critical components and assemblies including:
- Missile systems
- Aerospace engines
- Aircraft components
- Nuclear and pressurized water reactors
Sectors serviced by MTAR Technologies
- Clean Energy
- Nuclear
- Space
- Defence
MTAR Technologies also develops import substitutes such as ball screws and water-lubricated bearings used in the above sectors. The company has 3 products in the clean energy sector, 14 products in the nuclear sector, and 6 products in the space and defence sectors.
Clientele of MTRA Technologies Ltd
The company’s clients include:
- Bharat Dynamics
- Hindustan Aeronautics
- US-based Bloom Energy Corp
- Nuclear Power Corporation of India
- Indian Space Research Organization
- Research and Development Organisation
About MTAR Technologies Ltd IPO
MTAR Technologies is the 9th one to offer IPO so far in 2021. It has already raised Rs 100 cr via a pre-IPO placement. Here are the details of the MTAR Technologies IPO.
- The IPO, which is worth ~Rs 600 cr, is set to open on 3rd Mar and close on 5th Mar
- The face value of the shares will be Rs 10 apiece and the price band for the IPO is fixed at Rs 574 to Rs 575 per share. The lot size is 26 and multiples thereof
- Stocks would be listed on both NSE and BSE and the tentative date is 16th Mar 2021
- Implied market cap post issue is expected to be between Rs 1,766 cr and Rs 1,769 cr
Constituents and subscription of MTAR Technologies’ IPO
The issue size of the IPO is up to 1,03,72,419 equity shares consisting of:
- Fresh issue of up to 21,48,149 shares
- Offer for sale of up to 82,24,270 shares
The IPO is reserved for subscription as follows:
- 50% for Qualified Institutional Buyers (QIB)
- 15% for non-institutional investors
- 35% for retail investors
Book running lead managers and registrar of MTAR IPO
JM Financial and IIFL Securities are the running lead managers of the IPO and KFin Technologies Private Ltd is the registrar.
Purpose of MTAR Technologies Ltd IPO
The company looks to use the proceeds of the IPO for:
- Debt repayment
- Long-term working capital requirements
- General corporate purpose
Valuation of MTAR Technologies’ Ltd
At the higher price band of Rs 575, the stock is valued at 20x the earnings of Rs 28.3—FY 2020 earnings
Promoter holding of MTAR Technologies
Financials of MTAR Technologies Ltd
Despite the government slashing the defence budget, MTAR has earned consistent profits. The company has the lowest gearing ratio in the industry and a significant interest coverage ratio. Here are the other details:
- It has grown at a CAGR of 16.5% over the last 3 yrs
- For FY 2020, its EBITDA margins were 28.5% and net margin was 14%
Here’s the snapshot of MTAR Technologies Ltd’s financial performance over the last 3 yrs (amounts is Rs cr)
The total income of MTAR grew at a CAGR of 16.57%, profit after tax at a CAGR of 14.39%, and total assets at a CAGR of 11%.
Sector-wise breakdown of MTAR Technologies’ order book
The aggregate order book of MTAR Technologies as on 31st Dec 2020 was Rs 336 cr. Following is the sector-wise breakdown of the same:
Peer analysis
MTAR Technologies has no listed peers.
Strengths of MTAR Technologies Limited
- The Indian Precision Engineering Industry is worth Rs 409.8 cr and is expected to grow at a CAGR of 6% to 7% between 2020 and 2025. MTAR, being a leading player in the sector can capitalise on such a scope
- MTAR boasts a worldwide clientele, attractive return ratios, and sound R&D base and technological progress. Coupled with a healthy order book, competitive edge, and superior profitability compared to its peers, MTAR Technologies commands a premium
- MTAR Technologies Limited is equipped with precision engineering expertise that it employs in manufacturing, testing, and quality control of products
- MTAR started as a partnership firm but is now a renowned company in its industry. Over the years, it has developed a wide product portfolio and caters to diverse segments
- It has 7 manufacturing facilities. One of them is an export-oriented unit that is located in Hyderabad. The unit has been rendering its services to the clean energy, aerospace, and defence sectors for over 4 decades now
- Make in India, aim to exporter defence goods, and increasing budgetary allocations to defence and space sectors offer the company potential to grow
Risks of MTAR Technologies Ltd
- A disruption in the supply chain can have a huge impact on MTAR’s revenue
- Because of the critical nature and high national importance of its products, any error in quality requirements and failure to adhere to them can cost MTAR dearly
- As of 31st Dec 2020, the top 3 clients of 39 contributed 83.55% of MTAR Technologies Ltd’s revenue. Any loss of these clients will douse the demand for its products and impact the company’s revenue
- MTAR has a heavy dependency on government entities such as ISRO, NPCIL, and DRDO. A reduction of the budget in the respective sectors can adversely impact the company
- Liberalization of the defence and space sectors would lead to stiff- competition to MTAR’s business
That’s about it folks. We hope these points, in addition to your research, helps you make meaningful investing decisions.
