By 10.30 am, the issue had received bids for 3,04,10,848 shares, which was 4.16 times the issue size of 72,60,694 shares. The issue was subscribed 3.68 times till the end of Day 1 bidding process.
The IPO, which consists of a fresh issue of shares worth Rs 124 crore and an offer for sale (OFS) of Rs 473 crore worth of shares, is being sold in the Rs 574-575 price band. At this price band, the issue is demanding a P/E multiple of 47.3 times FY21 EPS of Rs 12.20, on an annualised basis.
On Tuesday, the company raised Rs 178.92 crore from 15 anchor investors at Rs 575 per share including Nomura Funds Ireland, Jupiter South Asia Investment, White Oak Capital and Goldman Sachs India.
Analysts said the company is into niche segments and can be a play on clean energy and ‘Atmanirbhar Bharat’. The Hyderabad-based precision engineering company manufactures critical and differentiated engineered products for nuclear, space and defence and clean energy and owns seven manufacturing facilities in Hyderabad, including an export-oriented unit.
MTAR’s order book stood at Rs 336 crore as of December 2020, which was 1.6 times of FY20 revenue. Space and defence segment accounted for 48 per cent of market share in order book, followed by the nuclear sector at 28 per cent and clean energy at 24 per cent. The company’s order book clocked 31 per cent CAGR over FY18-20.
In the clean energy space, the company makes hot boxes for Bloom Energy and is in the process of development and manufacture of hydrogen boxes and electrolysers to serve Bloom, which has been a client for nine years.
While hot boxes use methane to generate power, hydrogen boxes use methane to generate hydrogen, which in turn is used to generate power. In addition, electrolysers produce methane-free hydrogen, which is used to produce power. The opportunities in clean energy remain healthy with the government’s strong focus, higher budgetary allocation and incentives, analysts said.
“Going ahead, the fuel cell market is expected to grow at a CAGR of 14-15 per cent. This coupled with Bloom’s tie up with Gail to deploy fuel cell technology is expected to augur well for the company. Further, the company is also in the process of establishing a new manufacturing facility at Adibatla in Hyderabad that will enable it to take sheet metal jobs for Bloom Energy, Isro and certain other customers,” ICICI Direct said while recommending a ‘subscribe’ on the issue.
Arihant Capital finds the IPO aggressively priced, but cited the last two financial years of earnings, the prevailing orders and the company’s plan for more critical and high margin products with its niche play for the space, security and defence segment, as its reason to assign a ‘subscribe’ for the long term. The brokerage also sees prospects of decent listing gains.
On a trailing 12-month basis, the IPO is offered at 45.32 times and is seeking a market cap of Rs 1,769 crore.
“Considering the company’s expertise in providing a wide range of precision engineering products with complex manufacturing capability, high entry barrier, strong balance sheet & management; we give this IPO a “Subscribe” rating,” said Anand Rathi Financial Services.
