MTAR Technologies IPO to open on March 3; check grey market premium, price band and other details

MTAR Technologies, a precision engineering solutions company, is set to launch its initial public offering (IPO) on March 3. The public offer will open for subscription for three days until March 5. Here are the key things to know before subscribing to the issue:

About the offer: The Hyderabad based company is planning to raise an issue size of up to 10,372,419 shares (fresh issue of up to 2,148,149 equity shares and offer for sale of up to 8,224,270 equity shares). The issue size will be Rs 595- 596 crore with face value of Rs 10.

Price band: The company has fixed a price band of Rs 574-575 per share.

Lot size: Investors can bid for a minimum lot size of 26 shares and in multiples thereof.

Financials: The company has grown at 16.5% CAGR over the last 3 years at the topline, while its EBITDA margins were reported at 28.5% in FY 20. MTAR not being a typical defence or capital goods company still has a healthy order book at 1.7x FY20 revenues and superior profitability ratios as compared to its peers. In times when the government has been cutting down on the defence budget, the company has consistently delivered profits at the bottom line, with net margins at 14% in the last fiscal. It has a significant interest coverage ratio and the lowest gearing ratio in the industry.

Grey market premium: MTAR Technologies shares were seen trading at Rs 994-1000, implying a premium of over 40% in the grey market on Monday.

Should you subscribe: The stock is valued at 20x FY20 earnings of Rs 28.3 and commands premium considering its healthy order book, visibility of topline growth, competitive edge, superior profitability as compared to peers, return ratios, wide clientele spread across the globe, sound R&D base and technological progress, according to LKP Securities. The brokerage recommends ‘Subscribe’ to the IPO.

Marwadi Shares and Finance also has a ‘Subscribe’ rating to the issue. “Considering TTM adjusted EPS of 12 on a post-issue basis, the company is going to list at a P/E of 47.9 times with the 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 to ‘Subscribe’ this issue based on strong financials, future growth prospects, and reasonable valuations.”