MTAR Technologies IPO sails through on Day 1; should you subscribe?

The Rs 596-crore MTAR Technologies IPO got subscribed 1.47 times on the first day of the bidding process till 12.40 pm (IST). The precision engineering solutions company on Tuesday said it has raised Rs 179 crore from anchor investors.

The public offer received total bids of 1.06 crore shares so far against the total issue size of 72.60 lakh shares.

A total of 31,11,725 shares have been allocated to 15 anchor investors at Rs 575 a piece, which is the upper end of the price band. At this price, the company garnered Rs 179 crore, according to a circular uploaded on the BSE website.

Nomura Funds Ireland Public Limited Company, Jupiter South Asia Investment Company, White Oak Capital and Goldman Sachs India are foreign portfolio investors that have been allocated shares in the anchor book. In addition, domestic institutional investors who were allocated shares are SBI Mutual Fund (MF), Axis MF, ICICI Prudential MF, HDFC MF, Birla Sunlife MF, Kotak Mahindra MF, Nippon India MF, Franklin Templeton MF, Sundaram MF, Invesco MF and Birla Sun Life Insurance.

SBI MF and Axis MF had also invested Rs 70 crore and Rs 30 crore respectively in a pre-IPO round concluded last month.

Most brokerages have advised subscribing to the issue on the back of strong financials and future growth prospects. Here’s what analysts have to say about the IPO:

Geojit Financial Services: Subscribe
At the upper price band of Rs 575, MTAR is available at a P/E of 47.3x (annualised basis on FY21E EPS of Rs.12.2) which is aggressively priced. With no listed peers and positive sentiment in space and defence sectors due to Make in India and Atmanirbhar Bharat with limited competition for the products they manufacture, the brokerage assigned a Subscribe rating, with a long term perspective.

Marwadi Shares and Finance: Subscribe
Considering trailing twelve month adjusted EPS of 12 on a post-issue basis, the company is going to list at a P/E of 47.9 times with a market cap of Rs 1,769 crore. There are no listed entities in India that are engaged in a similar line of business and whose business is comparable with that of this business. The brokerage recommends ‘Subscribe’ this issue based on strong financials, future growth prospects and reasonable valuations.

Samco Securities: Subscribe
MTAR’s revenue and profits have grown at a CAGR of 15.7% and 140.3% respectively over FY18 to FY20. Overall, the company has a good financial track record with a debt to equity ratio of 0.13x. On the risks front, the company derives over 80% of its revenue from its top 3 customers and 49% of revenue from Bloom Energy leading to concentration risk. Besides, it does not have any long term contracts with its clients. 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, Samco Securities recommends to ‘Subscribe’ to this IPO for listing gains only.

Hem Securities: Subscribe
MTAR Technologies financial performance looks strong with a healthy balance sheet position. The company has a wide product portfolio along with a marquee customer base and a robust order book which gives strong revenue visibility going forward.