MTAR TECHNOLOGIES LTD IPO
(ZEE BUSINESS)
SEEMS FULLY PRICED - SUBSCRIBE FOR LONG TERM
|
BASIC DETAILS ABOUT IPO (3-5 March) |
|
|
Price Band |
574-575 |
|
Bid Lot |
26 |
|
OFS- AT Upper
Band (Cr) |
472.9 |
|
OFS (Shares)-
Cr |
0.82 |
|
Fresh issue (Amount) |
123.5 |
|
Fresh issue shares-cr |
0.215 |
|
Total issue amount- AT Upper Band |
596.4 |
|
Post issue Implied Market Cap |
1769cr |
|
Post issue (Shares) Cr |
3.076 |
|
Book Runner and Lead Managers: JM Financial , IIFL Securities |
|
|
SHAREHOLDING |
||
|
Particular |
Pre-Issue |
Post-Issue |
|
Promoter |
62.24% |
50.25% |
|
Public |
37.76% |
49.75% |
|
Total |
100% |
100% |
Financials- Balance Sheet
|
Balance sheet |
||||
|
Particulars |
31-Dec-20 |
31-Mar-20 |
31-Mar-19 |
31-Mar-18 |
|
PPE |
155 |
155 |
162 |
152 |
|
% of Total Assets |
40.6% |
44.8% |
53.1% |
54.1% |
|
Capital WIP |
18.9 |
11.7 |
5.6 |
1.8 |
|
% of Total Assets |
4.9% |
3.4% |
1.8% |
0.6% |
|
Total PPE+Capital WIP |
173.9 |
166.7 |
167.6 |
153.8 |
|
% of Total Assets |
45.5% |
48.1% |
54.9% |
54.7% |
|
Inventories |
79.1 |
75.5 |
41.1 |
41.9 |
|
% of Total Assets |
20.7% |
21.8% |
13.5% |
14.9% |
|
Trade receivable |
73.2 |
61.6 |
50.4 |
49 |
|
% of Total Assets |
19.2% |
17.8% |
16.5% |
17.4% |
|
Cash & Bank Balance |
21.5 |
23.2 |
10.8 |
90.7 |
|
% of Total Assets |
5.6% |
6.7% |
3.5% |
32.3% |
|
Other Current assets |
17.2 |
9.5 |
4.3 |
4.8 |
|
% of Total Assets |
4.5% |
2.7% |
1.4% |
1.7% |
|
Borrowings |
65.5 |
29 |
28.7 |
19.8 |
|
% of Total
Liabilities |
17.2% |
8.4% |
9.4% |
7.0% |
|
Equity |
245.6 |
225.1 |
235 |
205.5 |
|
% of Total Liabilities |
64.3% |
65.0% |
77.0% |
73.1% |
|
Trade Payable |
14.5 |
30.6 |
6 |
13.6 |
|
% of Total
Liabilities |
3.8% |
8.8% |
2.0% |
4.8% |
|
Other Current Liability |
38.1 |
49.3 |
32.9 |
29 |
|
% of Total
Liabilities |
10.0% |
14.2% |
10.8% |
10.3% |
|
Total Assets/Liabilities |
381.9 |
346.2 |
305.2 |
281 |
|
P&L |
||||
|
Particulars |
31-Dec-20 |
31-Mar-20 |
31-Mar-19 |
31-Mar-18 |
|
Revenue from Operation |
177.3 |
213.8 |
183.7 |
160 |
|
% Growth |
|
16.4% |
14.8% |
|
|
COMC |
74.8 |
87.3 |
65.5 |
66 |
|
% of Revenue |
42.2% |
40.8% |
35.7% |
41.3% |
|
Other expenses |
18.4 |
32 |
23.9 |
23.2 |
|
% of Revenue |
10.4% |
15.0% |
13.0% |
14.5% |
|
Employee benefit expenses |
37.4 |
51.6 |
43.5 |
44.6 |
|
% of Revenue |
21.1% |
24.1% |
23.7% |
27.9% |
|
Depreciation and Amortisation |
9.3 |
12.1 |
11.2 |
11.2 |
|
% of Revenue |
5.2% |
5.7% |
6.1% |
7.0% |
|
PBT |
39.6 |
45.5 |
41.6 |
17.2 |
|
PBT Margin |
22.3% |
21.3% |
22.6% |
10.8% |
|
PAT |
28.1 |
31.3 |
39.2 |
5.4 |
|
PAT Margin |
15.8% |
14.6% |
21.3% |
3.4% |
|
Restated PAT |
21.0 |
32.3 |
29.5 |
12.2 |
|
Restated PAT
Margin |
11.9% |
15.1% |
16.1% |
7.7% |
ABOUT Company’s Business
·
MTAR Technologies Limited (“MTAR Technologies”)
was incorporated on November 11, 1999. The company is a leading precision
engineering solutions ,company engaged in the manufacture of mission critical
precision components
·
The company primarily serve customers in the
nuclear, space and defence, and clean energy sectors.
·
Company’s business segment include Civilian Nuclear,
Space, Defence & Aerospace, Clean Energy and Ball screws and Roller screws.
·
Company has clean energy as one of the key
customer sectors and are accordingly, involved in the manufacture of power
units, specifically hot boxes, and in the development and manufacture of
hydrogen boxes and electrolyzers, to serve Bloom Energy Inc., United States
(“Bloom Energy”) with which, we have been associated with for over nine years
·
Hot Boxes/Hydrogen Boxes- Hot boxes use methane
to generate power, hydrogen boxes use methane to generate hydrogen that shall
in-turn, be used to generate power & electrolysers produce methane-free
hydrogen that is used to produce power.
·
Company has long Standing relationship with
(Over 3 decades) Indian Space Research Organisation (“ISRO”) and the Defence
Research and Development Organisation (“DRDO”)(Over 4 decades) to whom they have been able to supply specialized
products to the Indian space programme and the Indian missile programme.
ABOUT Management
·
Subbu
Venkata Rama Behara : is the Chairman of the Board, and an Independent
Director of the company. Apart from his association with the company, he is a
director on the boards of Ola Electric Mobility Pvt. Ltd., Greaves Cotton Ltd.
KPIT Technology etc., amongst others. He
holds a master’s degree in arts, with a specialisation in economics, from the
Jawaharlal Nehru University and a post graduate diploma in international trade
from the Indian Institute of Foreign Trade, New Delhi.
·
Parvat
Srinivas Reddy is the Managing Director of the company. He has been a
director on the Board since March 11, 2015 and was appointed as the Managing
Director on September 1, 2020. He has been entrusted with the overall
responsibility of management of the company and its affairs. He has over 29 years
of work experience.
·
Gnana
Sekaran Venkatasamy is the Independent Director on the Board of the
company. He has previously served with the Defence Research and Development
Organisation (“DRDO”) in various capacities including as the Director of the
Advanced Systems Laboratory. He has been awarded the DRDO Award for Performance
Excellence, 2012 for his contribution to design and technology development of
indigenous long range strategic missile system, the ‘Scientist of the Year’
award in 2003
·
Vedachalam Nagarajan is the Independent
Director on the Board of the company. He had worked with the Indian Space
Research Organisation (“ISRO”) for over 35 years in many capacities. He has
been a member of various government committees, including the High Level Safety
Review Committee of the Ministry of Railways, among others. He was awarded the
Padma Shri award by the Government of India on the 54th Republic Day.
·
Udaymitra
Chandrakant Muktibodh is the Independent Director on the Board of the
company. He has formerly served with the Nuclear Power Corporation of India
Ltd. (“NPCIL”) in various capacities including as its technical director. He
was awarded the ‘NPCIL Excellence Award’ by Nuclear Power Corporation of India
Limited in recognition of his contributions to the design, development and
engineering of various nuclear and conventional systems, and was part of a
group that was awarded the ‘Group Achievement Award’
PRO’s
·
Company have
diversified sector mix in which company offers niche products which are very
critical components hence seems products which they offer are not easily
replaceable also their clients are with them from long time.
Bloom Energy - Since 9 years
ISRO -
Past 3 decaded
Nuclear Power
corporation - over 16 years
|
Sector |
9MFY21 |
FY20 |
FY19 |
FY18 |
|
Clean Energy |
49.3% |
64.3% |
61.4% |
49.1% |
|
Nuclear |
27.1% |
14.3% |
13.0% |
29.0% |
|
Space and Defence |
20.6% |
18.4% |
20.0% |
16.4% |
|
Total |
97.0% |
97.0% |
94.4% |
94.5% |
·
Company does
exports more than 50% of its Total Revenue and as from FY18 to FY19 company’s exports
rose from 78.4cr to 113.3cr which resulted in
company’s improved EBITDA Margin from 20% to 29.2% also in 9MFY20 company’s exports account for 53.8%
yet EBITDA margin improved from 29.2% to 29.9% mainly due to reduced other
expenses and company showed conviction in not only maintaining but improving
the margins.
|
Particulars |
9MFY21 |
FY20 |
FY19 |
FY18 |
|
Revenue(Ex- other Operating) |
174.3 |
208.5 |
177.7 |
158.2 |
|
India |
80.5 |
67.6 |
64.3 |
79.8 |
|
Outside India |
93.8 |
140.9 |
113.3 |
78.4 |
|
India % |
46.2% |
32.4% |
36.2% |
50.4% |
|
Outside
India % |
53.8% |
67.6% |
63.8% |
49.6% |
|
|
||||
|
EBITDA |
53 |
57.9 |
53.7 |
31.9 |
|
Margin |
29.9% |
27.1% |
29.2% |
20.0% |
|
Particulars |
9MFY21 |
FY20 |
FY19 |
FY18 |
|
Other Expense |
18.4 |
32 |
23.9 |
23.2 |
|
Other Expense as % Revenue |
10.4% |
15.0% |
13.0% |
14.5% |
|
Under
Other expense |
|
|
|
|
|
Sub-Contractor charges |
3.4 |
7.9 |
7 |
7.3 |
·
Company
seems fully priced but with the niche segment with good management quality and
improving EBITDA margins stock seems can be subscribed for long term with a
strict watch on Q4FY21 numbers.
|
Valuation Company
has no Listed Peer |
|
|
PE TTM |
42 |
|
PB TTM |
6.7 |
|
ROE |
15% |
·
Company’s
management is well experienced with years of experience in the field also some
of directors have hold higher positions in DRDO, ISRO etc also management
empasis on corporate governance further increase the faith in quality of
promoters also company was initially started in 1970 as partnership firm so has
a history of 50 years.
·
As the fresh
issue will be used for funding working capital need and Repayment of debt,
hence after which company will become complete debt free (Both long term and
also Working capital loan)
Fresh issue 124cr
|
Balance sheet |
||||
|
Particulars |
31-Dec-20 |
31-Mar-20 |
31-Mar-19 |
31-Mar-18 |
|
Borrowings |
65.5 |
29 |
28.7 |
19.8 |
|
Long term |
7.2 |
- |
- |
- |
|
Working capital |
58.3 |
29.1 |
28.7 |
19.8 |
·
Company
don’t work on cost+ model hence we saw significant rise in margins possible
which indirectly pushed company for new and better ways when margins are
usually not fixed before hand.Also there have been no instance in past where
order has been cancelled.
CON’s
·
High
customer concentration Top 3 customers account for 80%. Bloom Energy alone
contributes 49% of the Total Revenue for 9MFY21 which was as high as 65% in
FY20. And company have no long term purchase agreement with any of its
customers.(Although management clarified but still significant concentration is
a major Risk)
|
Particulars (%) |
9MFY21 |
FY20 |
FY19 |
FY18 |
|
Bloom Energy |
49.3% |
64.5% |
61.4% |
49.1% |
|
Nuclear Power Corporation of India |
23.1% |
11.0% |
12.3% |
28.0% |
|
ISRO |
7.6% |
8.1% |
11.2% |
8.1% |
|
Total (%) |
80.0% |
83.6% |
84.9% |
85.2% |
|
|
||||
|
Particulars (Amount) |
|
|
|
|
|
Bloom Energy |
87.5 |
138.0 |
112.8 |
78.6 |
|
Nuclear Power Corporation of India |
40.9 |
23.4 |
22.6 |
44.8 |
|
ISRO |
13.5 |
17.3 |
20.5 |
12.9 |
|
Total |
141.9 |
178.6 |
155.9 |
136.3 |
|
% of Total
Revenue |
80.0% |
83.6% |
84.9% |
85.2% |
·
Company’s Receivable days and Inventory days are very high , Together are
as high as 244 days which is a cause of concern and hence we see working
capital loan rising. Since the Fresh issue will be used for working capital
loans but the real problem has been high Debtors/Inventory days.
|
Particulars |
TTM Dec 21 |
FY20 |
FY19 |
|
Receivable Days A |
138 |
96 |
99 |
|
Inventory Days B |
106 |
100 |
82 |
|
A + B |
244 |
196 |
181 |
|
Payable days |
89 |
63 |
58 |
|
CCC |
155 |
133 |
123 |
|
Particulars |
31 Dec
20 |
31 Mar
20 |
31 Mar
18 |
|
Borrowing (Current Liability) |
58.3 |
29.1 |
19.8 |
·
Company source more than 40% of its raw material from Top Two suppliers
thus company have concentration Risk here also. Concentration is because for
certain raw material company needs there are only few suppliers who provide it.
|
Raw
material |
9MFY21 |
FY20 |
FY19 |
FY18 |
|
Top 2 supplier |
40% |
43% |
45% |
41% |
·
Pre IPO private placement basis SBI Fund and Axis Fund together bought
18.51 lac share although at 540 i.e. discount of 6.5% from IPO Price (Although
they have lock in Period of 1 year as what management told) .Now that can be
looked both ways one that those mutual funds are seeing max downside till 540
in an years time and other side for 1 year lock in if management is determined
of good earnings may not have given them discount.
·
There has been a mis match between order book
bifurcation and contribution to revenue sector wise and although order book was
growing in past 2 years but slowed down in 9MFY21.
|
Order
Book as on 31 Dec 2020 |
Order
Book % |
Revenue
% |
31-Mar-20 |
31-Mar-19 |
31-Mar-18 |
|
|
Clean Energy |
80.2 |
23.9% |
49.0% |
|
||
|
Nuclear Sector |
93.1 |
27.7% |
27.0% |
|||
|
Space and Defence |
160.6 |
47.8% |
21.0% |
|||
|
Total Order Book |
336.1 |
99.3% |
|
345.1 |
243.7 |
201.9 |
|
Growth |
-2.6% |
|
41.6% |
20.7% |
- |
|
ANCHOR BOOK
Axis mutual
Fund
13.7%
SBI
fund
13.7%
Nippon
life
5.6%
Franklin
5.6%
Goldman
5.6%
Nomura
5.6%
Jupiter
south Asia Investment company
5.6%
Sundaram
Fund
5.6%
ITPL
invesco
5.6%
Aditya
Birla 5.6%
HDFC
Fund
5.6%
ICICI
pru
5.6%
Kotak
Fund
5.6%
Other
11%
TOTAL
100%
Interesting is Axis and SBI Fund are
clearly betting big because they together bought 18.5 lac share in pre ipo
placement and now around 8.5 lac share in Anchor Book also which becomes a PRO.
The best way to explain it is SBI and Axis
Fund are seeing more potential than what management saw because per ipo was on
discount yet both fund buying good at 575 too.
Also both the fund
have invested by various fund but interesting is both have Children
Gift/Benefit Fund name thus seems investing for very long time
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