The Rs 600 crore initial public offering (IPO) for MTAR Technologies, a precision engineering solutions company, opened for subscription today with a price band of Rs 574-575 per share.
The public issue consists of a fresh issue of Rs 124 crore (21.48 lakh share) by the company and an offer for sale of Rs 473 crore (82.24 lakh shares) by promoters and investors.
Funds raised from the fresh issue of shares will be used for repaying loans, for working capital, and for general corporate purposes. The money from the 'offer for sale' part of the IPO will go to the shareholders who offload their stake.
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The company manufactures critical and differentiated engineered products in the nuclear, space and defence, and clean energy segments, and owns seven manufacturing facilities in Hyderabad, including an export-oriented unit.
Most brokerages have advised subscribing to the issue for listing gains as well as for long-term investment on the back of huge opportunities, good financials, the government's focus on the manufacturing sector, growing demand and rising investment in the space.
Here's a look at what the brokerages have to say:
Religare Securities: Subscribe from a long term view
MTAR is well placed in this segment on the back of its precision
engineering expertise and specialized fabrication facilities, for onward usage by its customers in the clean energy, nuclear, and space and defence sectors in India, and abroad. Further, it has a wide product portfolio and a long-standing relationship with its customers. Going forward, the company plans to strengthen its existing product portfolio and look to diversify into high-growth and high profitability products. Further, the company plans to increase focus on exports by expanding its international presence. On the valuation front, the company is richly valued at 52x FY20 EPS. From a long-term perspective, investors can consider applying for the IPO.
ICICI Direct - Subscribe
India has 22 operational nuclear reactors with a capacity of 6.3 GW. The
country plans to double its nuclear capacity to 11.5 GW. Hence, seven new
reactors are expected to come into operation in the next five years. This will create a huge opportunity for MTAR in the large refurbishment and maintenance market that is also expected to increase 1.6x. Taking cognisance of the huge growth opportunities for MTAR and a high margin business that would aid the flow of profitability to the bottomline, we recommend SUBSCRIBE rating on the issue.
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Samco Securities - Subscribe for listing gains
MTAR is a leading precision engineering solutions company with a presence in the Nuclear, Defence & Space and clean energy sectors. Backed by growing demand and rising investment in these sectors, the demand for precision engineering products is expected to rise steadily in the upcoming years. Also, the government’s efforts to boost the manufacturing sector and make in India campaign will drive growth.
On the risks front, the company derives over 80 percent of its revenue from its top 3 customers and 49 percent of revenue from Bloom Energy leading to concentration risk. Besides, it does not have any long term contracts with its clients. Overall MTAR is overpriced at an FY20 P/E of 57.5 times. But it has been commanding a good grey market premium, indicating the offer will sail through. Keeping the risks in mind, we recommend to SUBSCRIBE to this IPO for listing gains only.
Geojit Financial - Subscribe with a long term view
At the upper price band, MTAR is available at a P/E of 47.3x, which is aggressively priced. With no listed peers, positive sentiment in space and defence sectors due to Make in India and Atmanirbhar Bharat and limited competition for the products they manufacture, we assign a Subscribe rating, with a long term view.
LKP Securities - Subscribe
At the higher price band, the stock is valued at 20x FY20 earnings of Rs 28.3 and commands premium considering its healthy order book, visibility of top-line growth, competitive edge, superior profitability as compared to peers, return ratios, wide clientele spread across the globe, sound R&D base and technological progress. We recommend investors to Subscribe to the IPO.
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