MTAR Technologies IPO to open on March 3: Here’s what brokerages have to say

MTAR Technologies, a Hyderabad based precision engineering solutions company, is set to launch its initial public offering (IPO) for subscription on March 3. The company has fixed a price band of Rs 574-575 per equity share.

The public offer will close on March 5. The IPO is a fresh issuance of up to 21,48,149 equity shares and an offer for sale of up to 8,224,270 equity shares by selling shareholders.

The company proposes to utilise the net proceeds from the fresh issue towards repayments of borrowings by the company, funding working capital requirements and for general corporate purposes. JM Financial and IIFL Securities are appointed as the book running lead managers to the issue.

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:

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.

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.