There are some interesting IPOs scheduled to be launched in 2021. One such IPO is the MTAR Technologies Limited IPO that is being launched on March 03, 2021. Here is all you need to know about the issue.
|IPO Date||March 03, 2021 to March 05, 2021|
|Issue Type||Book Built Issue IPO|
|Issue Size||10,372,419 Equity Shares of Rs.10 totaling up to Rs.596.41 Crore|
|Fresh Issue||2,148,149 Equity Shares of Rs.10 totaling up to Rs.123.52 Crore|
|Offer for Sale||8,224,270 Equity Shares of Rs.10 totaling up to Rs.472.90 Crore|
|Face Value||Rs.10 per equity share|
|IPO Price||Rs.574 to Rs.575 per equity share|
|Market Lot||26 shares|
|Min Order Quantity||26 shares|
|Listing At||BSE, NSE|
|Bid/Offer Launch date||March 03, 2021|
|Bid/Offer Last date||March 05, 2021|
|Basis of Allotment finalization date||March 10, 2021|
|Initiation of Refunds||March 12, 2021|
|Credit of Shares to Demat Acct||March 15, 2021|
|IPO Shares Listing Date||March 16, 2021|
MTAR Technologies Limited is a precision engineering solutions company. It is primarily into the manufacture of mission-critical precision components with close tolerances and in critical assemblies to serve projects of high national importance.
To fulfill its role, it uses its precision machining, assembly, testing, quality control, and specialized fabrication competencies, some of which have been indigenously developed and manufactured.
The primary sectors services by MTAR Technologies are Clean Energy, Nuclear, Space, and Defense.
Since its inception, MTAR has constantly contributed to the Indian civilian nuclear power program, Indian space program, Indian defense and aerospace sector, as well as to the global clean energy sector and the global defense and aerospace sector.
Further, the company has developed import substitutes like ball screws and water-lubricated bearings used in the above mentioned sectors.
While the bids for the projects in the nuclear, space, and defense sectors are invited by issuing tender inquiries, the qualification process for securing such tenders is extremely stringent as there is no scope for faults in such sectors.
MTAR Technologies Limited started operations in 1970 as a partnership firm and was incorporated into a company in 1999. In 1970, MTAR established its first Unit for orders from Bharat Heavy Electricals Limited (BHEL).
Two years later, the company received its first order for Hindustan Machine Tools (HMT) Limited. By 1980, MTAR had started a Unit for Rough Machining Operations, a Heat and Surface Treatment Plant, and started supplying components to the Indian Space Research Organization (ISRO).
By 1985, MTAR started manufacturing ball screws too. Over the next few years, MTAR managed to enter the Defense sector by making the Defense Research and Development Organization (DRDO), Hindustan Aeronautics Limited (HAL), Gas Turbine Research Establishment (GTRE), and Aeronautical Development Agency (ADA) its clients.
In 1989, MTAR supplied the first Vikas Engine – a liquid-fuelled rocket engine.
After incorporating a company in 1999, MTAR started manufacturing base shroud, Fin assembly, and pneumatic components for use in Agni programs. Its Defense and Space portfolio grew and by 2002, the company established an additional Unit for boosting its manufacturing capacity.
In 2008, MTAR commenced manufacturing grid plates for a 500 Megawatt reactor and established an export-oriented Unit by 2010. This was followed by the commencement of the manufacture of power units for Bloom Energy, Defense-related exports, and the development of roller screws as an import substitute.
Here is a quick look at the financial performance of MTAR Technologies Limited over the last three years:
|Dec 2020||Mar 2020||2019||2018|
|Profit After Tax||28.07||31.32||39.20||5.42|
All amounts in INR Crore
A quick glance at the financial performance of MTAR Technologies over the last three years highlights significant growth. During this period, the total income of the company showed growth at a CAGR of 16.57%. Further, between 2018 and 2020, the profit after tax grew at a staggering CAGR of 14.39%. Also, the company’s total assets grew at a CAGR of 11%.
The Engineering sector in India is divided into two segments – heavy and light engineering. The classification is based on the nature of the product and technology used for processing. Heavy engineering includes manufacturing and assembly of industrial machinery and plant equipment for various end-use sectors. On the other hand, light engineering includes sub-sectors, manufacturing everything from basic to sophisticated equipment.
Precision engineering is a sub-discipline of engineering and is concerned with manufacturing and assembling items that have an exceptionally low tolerance and are required to perform consistently over longer repeat cycles. Precision engineering products and components are especially important for critical applications such as aviation, aerospace, space, defense, and nuclear power plants, control equipment for process plants, where errors can cause greater damage.
Precision engineering players cater to select end-use sectors and have developed expertise in that space. The value chain comprises three broad segments of suppliers – automotive, industrial, and niche applications (defense, nuclear, aviation, and marine). Of these, sectors like defense, aerospace, nuclear, aviation, and marine have requirements of high material performance and special material properties are serviced by suppliers who have developed expertise for these niche applications.
The Indian Precision Engineering Industry is pegged at Rs.4,098 Billion and is expected to grow at a CAGR of 7.1% between 2016 and 2020 and a CAGR of 6-7% between 2020 and 2025. While Auto components have the largest share in the precision engineering market, Defense, Aerospace, and Aviation sectors follow close behind.
According to the Red Herring Prospectus, there are no listed companies that engage in a business similar to that of MTAR Technologies Limited. Hence, it is not possible to provide any industry comparison.
Since there are no peers to compare the valuation of the MTAR IPO with the peer benchmark, investors will need to look at the intrinsic value of the company and compare it with its proposed share price.
We will use the intrinsic value formula provided by the founder of value investing – Benjamin Graham:
Intrinsic Value = Current Earnings x (8.5 + [2 x expected annual growth rate])
In FY 2020, MTAR booked profits of Rs.31.32 crores. Also, let’s take the estimated annual growth rate at 6.5% (based on the estimated growth rate of the precision engineering industry for 2020-2025). Therefore,
Intrinsic Value of MTAR = 31.32 x (8.5 + [2 x 6.5]) = Rs.673.38 crores
Even if we deduct a margin of safety of 10%, the intrinsic value of MTAR = Rs.606.04 crores
As per the IPO structure, the company has a market cap of Rs.1538.65 crores.
MTAR Technologies Limited proposes to utilize the net proceeds from the fresh issue for the following object:
Here are some things that you need to keep in mind before investing in the MTAR Technologies IPO:
Q1. What is the MTAR Technologies Limited IPO?
The MTAR Technologies Limited IPO is a Main Board IPO for the issue of 10,372,419 equity shares having the face value of Rs.10 totaling up to Rs.596.41 crores. The registrar for the IPO is KFintech Private Limited and the shares are proposed to be listed on the BSE and NSE.
Q2. What are the open and close dates of the MTAR Technologies Limited IPO?
The MTAR Technologies Limited IPO opens on March 03, 2021, and closes on March 05, 2021.
Q3. What are the lot size and minimum order quantity of the MTAR Technologies Limited IPO?
The lot size of the MTAR Technologies IPO is 26 shares. Also, the minimum order quantity is 26 shares.
Q4. What are the allotment and listing dates of the MTAR Technologies Limited IPO?
According to the RHP, the basis of allotment will be finalized by March 10, 2021. Further, investors can expect to receive the credits in their Demat account by March 15, 2021.