Moneycontrol
you are here: HomeNewsBusinessIPO
Last Updated : Mar 21, 2018 10:12 AM IST | Source: Moneycontrol.com

Mishra Dhatu Nigam IPO opens; 10 key things you should know before investing

The government through MIDHANI issue is aimed to raise Rs 423.8-438.4 crore at lower and upper end of price band, by diluting 26 percent equity of the company.

Moneycontrol News @moneycontrolcom
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

State-owned steel manufacturer Mishra Dhatu Nigam (MIDHANI) has opened its initial public offering for subscription on Wednesday.

SBI Capital Markets and IDBI Capital Markets & Securities are the book running lead managers to the offer. Equity shares are proposed to be listed on BSE and NSE.

Here are 10 key things you should know before investing:

Company Profile

Established in 1973, MIDHANI is one of the leading manufacturers of special steels, superalloys and only manufacturer of titanium alloys in India. These are high value products which cater to niche end user segments such as defence, space and energy.

The company has emerged as a ‘National Centre for Excellence’ in advanced metallurgical production of special metals and super alloys in India. With the growth in business and operations, company achieved the status of a Mini Ratna, Category-I company in 2009.

The company’s products are key ingredients for strategic sectors in India, which typically are not available for import from other countries due to its national security concerns.

Presently, MIDHANI conducts its operations at the manufacturing facility located in Hyderabad. It is in the process of setting up two new manufacturing facilities in Rohtak and Nellore.

About the Issue

The IPO comprises of an offer for sale of 4,87,08,400 equity shares by the President of India acting through the Ministry of Defence.

The offer will constitute 26 percent of the post issue paid-up equity share capital.

The issue consists of a reservation of up to 18,73,400 equity shares for subscription by eligible employees and the net public offer of 4,68,35,000 equity shares.

The company has fixed price band at Rs 87-90 per share for the issue that is scheduled to close on March 23, 2018.

Fund raising

The government through MIDHANI issue is aimed to raise Rs 423.8-438.4 crore at lower and upper end of price band, by diluting 26 percent equity of the company.

Objects of the Issue

As it is an offer for sale issue, the company will not receive any proceeds from the Offer and all proceeds will go to the government.

Hence, the objects of the offer are to carry out the disinvestment of 4,87,08,400 equity shares by the selling shareholder; and to achieve the benefits of listing the equity shares on the stock exchanges.

Strengths

> MIDHANI has the most advanced and unique facilities: It is the only facility in India to carry out vacuum based melting and refining through world class vacuum melting furnace such as vacuum induction melting, vacuum arc remelting, vacuum degassing/ vacuum oxygen decarburisation, electro slag remelting and electron- beam melting.

> It has capability to manufacture wide range of advanced products: It has process capabilities across the product manufacturing value chain, including melting, forging, rolling, wire drawing, investment casting, machining and quality testing.

> The company has a strong and an established relationship with customers.

> To be at par with the global technological progress, it places strong emphasis on technology of products, technology of process and technology of equipment. Its in-house research and development team works towards improvement of product quality and processes innovation.

> MIDHANI has highly qualified and experienced management and management systems.

Financials

MIDHANI has continuously posted profits in the last five fiscals.

Image12132018

Promoter

Promoter is the President of India acting through the Ministry of Defence.

Promoter, along with its nominees, currently holds 100 percent of the pre-offer paid-up equity share capital. Assuming the sale of all Offered shares, after this offer, promoter will hold 74 percent of the post offer paid-up capital.

Management

Image122132018

Dinesh Kumar Likhi is the Chairman and Managing Director of the company. He holds a bachelor’s degree in metallurgical engineering from the Indian Institute of Technology Roorkee and master’s degree in metallurgical engineering from the National Institute of Technology Rourkela. He has 35 years of experience in automobile, steel and special metal alloys industry.

Image102132018

Dividend Policy

As per CPSE Capital Restructuring Guidelines, all central public sector enterprises are required to pay a minimum annual dividend of 30 percent of profit after tax or 5 percent of the net-worth, whichever is higher.

The dividend and dividend tax paid by our Company during the last five Fiscals is presented below:

Image112132018

Dividend amounting to Rs 37.89 crore has been paid on October 25, 2017 for the FY17 pursuant to AGM held on September 25, 2017.

Risks & Concerns

Here are some risks and concerns highlighted by brokerage houses:

> MIDHANI currently supply to strategic sectors. A decline or reprioritisation on the focus on strategic sectors will have a material adverse impact on its business.

> Business operation is based out of the single manufacturing unit in Telangana. The loss of, or shutdown of the operations at the unit in Telangana will have a material adverse effect on the business, financial condition and results of operations.

> A majority of revenue is derived from top five customers. Sales to top five customers contributed 64.75 percent, 70.29 percent and 65.80 percent of revenues from operations during fiscals 2017, 2016 and 2015 respectively. Hence the company is highly depended on few customers.

> The manufacturing processes for the products are complex and hazardous.

> The GoI has significant influence over MIDHANI which may restrict its ability to manage its business. Any change in GoI policy could have a material adverse effect on its financial condition and results of operations.

> The business environment in many of principal operating segments requires extensive research, design and development expenses to keep pace with rapid technological and market changes in the strategic sectors.

> Any event of delay in completion of planned capex for two new manufacturing facilities (if undertaken) will lead to cost and time overrun materially impacting the performance of the company.

> The company is exposed to the risk of increase in the price of its raw materials and dependence on suppliers for supply of the raw materials. Further, if it is unable to source quality raw materials required for its business at competitive prices, its business, results of operations and profitability may be adversely affected.

> As a result of national securities concerns, certain information in relation to MIDHANI’s business and operations is classified as ‘secret and confidential’ pursuant to which they have neither disclosed such information in the DRHP and other sources.

> MIDHANI registered single digit growth rate in last four years. Revenues grew at around 9 percent CAGR from Rs 553.9 crore in FY13 to Rs 773.3 crore in FY17. PAT increased at 7.7 percent CAGR from Rs 94.0 crore in FY13 to Rs 126.3 crore in FY17.

> Operations during H1FY18 were impacted by operational shutdowns of one of the forging press for maintenance. The management indicated the press had been shut down during the start of FY18 and is likely to remain shut for the rest of FY18. This facility is likely to restart only in April 2018. The impact was also visible in H1FY18 revenues of around Rs 204 crore and EBITDA margin of 22 percent (versus Rs 773 crore, 24 percent in FY17).

> The proposed 100 percent foreign direct investment (FDI) in defence services with full technology transfer aims to address the need for capital investment and improved technology transfer. The 100% FDI in defence services, if permitted, will result in intense competition materially impacting the business of the company.
First Published on Mar 21, 2018 10:12 am
Loading...
Sections
Follow us on
Available On
PCI DSS Compliant