MTAR Technologies IPO Review 2021: The MTAR Technologies IPO opens on 3rd March and closes on 5th March 2021. In this article, we cover the MTAR Technologies IPO Review and look into important IPO information and find out the possible prospects of the company. Let’s get started.
MTAR Technologies IPO – About Company
MTAR Technologies is the Indian leader in the precision engineering industry. The company manufactures mission-critical components with close tolerances (5-10 microns) in critical assemblies, to serve projects of high national importance. Precision engineering is a sub-discipline concerned with designing machines, fixtures, and other structures that have exceptionally low tolerances, are repeatable and are stable over time.
Its products are used in aviation, aerospace, space, defence, and nuclear power plants. The product’s applications in these sectors are critical as minute errors can lead to great damages. MTAR is able to specialize its products through its precision machining, assembly, specialized fabrication, testing, and quality control processes.
The company has precision engineering capabilities to build missile systems, aircraft components, nuclear and pressurized water reactors, aerospace engines, and many other vital components.
History of MTAR Technologies
MTAR was founded in 1970 as a partnership firm. The same year they received their first order from Bharat Heavy Electricals Limited (BHEL).
The firm went onto manufacture products for companies like Hindustan Machine Tools (HMT), Indian Space Research Organization (ISRO), Defense Research and Development Organization (DRDO), Hindustan Aeronautics Limited (HAL), Gas Turbine Research Establishment (GTRE), and Aeronautical Development Agency (ADA). MTAR was incorporated into a company in 1999.
In 2008, the company began an export-oriented unit by manufacturing 500-watt megawatt reactors. The company also began substituting imports by developing import substitutes. Over the years, MTAR has developed a wide product portfolio catering to customers in diverse segments.
Currently, it has three kinds of products in the clean energy sector, 14 kinds of products in the nuclear sector, and six kinds of products in Space and Defense sectors. Its clients today include ISRO, NPCIL, DRDO, Rafael, Elbit, etc. In the Clean Energy sector, MTAR has supplied US-based Bloom Energy with hydrogen boxes and electrolyzers for over 9 years.
Important projects of MTAR Technologies
Here are some important projects to which MTAR Technologies has contributed:
- Supplied the first Vikas Engine( liquid-fuelled rocket engine in 1989)
- Indian civilian nuclear power program
- Indian space program
- AGNI Program – MTAR manufactured base shroud, Fin assembly and pneumatic components.
- Liquid propulsion engines for GSLV Mark III. (A launch vehicle for crewed missions and dedicated science missions like Chandrayaan-2)
- Actuators for LCA(Light Combat Aircraft) by HAL.
MTAR operates through its 7 state-of-the-art manufacturing facilities in Hyderabad and Telangana. These facilities include end-to-end capabilities like precision machining, assembly, specialized fabrication, brazing and heat treatment, testing and quality control and other specialized processes.
The company also emphasizes on R&D of their manufacturing processes as it allows them to evolve their own process technologies thereby enabling them to achieve design specifications with accuracy irrespective of the size of the products.
MTAR Technologies IPO Review: Risks in Company
Although the company shows impressive financials investors must note that these revenues are sourced from a few clients in a niche industry. Clients like ISRO, DRDO, NPCIL, and Bloom Energy contribute major chunks to its revenue. From April to December 2020 Bloom Energy accounted for 49% of the company’s revenue to its fuel cell segment. NPCIL accounted for 27% of the revenue to its nuclear segment. ISRO and DRDO accounted for 21% of its revenue in the space and defence segment.
The company also operates in an industry where the margin for error is minute to nonexistent. Any errors could cause lots of damage and also lose the few clients the company has forever. Any changes in government policies towards the sectors the company functions in will have an adverse impact on the company’s earning potential. The increased liberalization of the defence/space sector in favour of foreign and private companies could also have an adverse impact on the MTAR.
MTAR Technologies IPO Review – Key Information
MTAR Technologies has appointed IIFL Securities and JM Financial as the book-running lead managers to the IPO. KFintech Private Limited has been appointed as registrar to the IPO.
|IPO Size||₹596.41 Cr|
|Fresh Issue||₹123.52 Cr|
|Offer For Sale(OFS)||₹472.90 Cr|
|Opening Date||Mar 3, 2021|
|Closing Date||Mar 5, 2021|
|Face Value||₹10 per equity share|
|Price Band||₹574 to ₹575|
|Lot Size||26 Shares|
|Minimum Lot Size||1 Lot (26 Shares- ₹14,950)|
|Maximum Lot Size||13 Lots ( 338 Shares - ₹194,350)|
|Listing Date:||Mar 16, 2021|
Their Promoters include Parvat Srinivas Reddy, P. Leelavathi, K. Shalini, D. Anitha Reddy, C. Usha Reddy, G. Kavitha Reddy, Anushman Reddy, P. Kalpana Reddy, Saranya Loka Reddy, A. Manogna, and M. Madhavi.
The offer for sale by the company includes P Leelavathi selling 4,50,000 equity shares. Parvat Srinivas Reddy, Saranya Loka Reddy, G Kavitha Reddy and A Manogna each selling 3 lakh shares. K Shalini selling 2.25 lakh shares, C Usha Reddy selling 2 lakh shares, Kalpana Reddy selling 1,49,970 shares, D Anitha Reddy selling 1.25 lakh shares. It also includes investor Fabmohur Advisors LLP and P Simhadri Reddy selling 57,84,300 equity shares and 90,000 shares, respectively.
Grey Market Premium
As of 25th Feb, the shares of MTAR Technologies were trading at a price of Rs 820. This meant that its shares commanded a grey market premium of Rs 245 or 42.60% over the issue price.
MTAR Technologies IPO – Objects of the Issue
The net proceeds from the issue will be used for
- Repayment of borrowings.
- Financing working capital requirements
- Other general corporate purposes
MTAR Technologies over the years has played a critical role in various projects of national importance. The company has several cons as seen above. It is also part of the Precision industry which is worth Rs. 4,098 Billion in India. The Auto sector forms a major component of this market followed by the Defense, Aerospace, and Aviation sectors.
The industry has grown at a CAGR of 7.1% between 2016 and 2020 and is expected to grow at a CAGR of 6-7% between 2020 and 2025. Investors must also take note of the several cons related to the niche segment the company operates in.
That’s all for this post. Do let us know what you think of the MTAR Technologies IPO Review. Are you planning to apply for this IPO or not? Comment below. Happy Investing!
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.