MTAR Technologies IPO: 10 things you should know before the issue opens

1) Public Issue

The 1,03,72,419-equity shares IPO consists of a fresh issue of 21,48,149 equity shares and an offer for sale of 82,24,270 equity shares by existing shareholders.

The offer for sale comprises 4.5 lakh equity shares by P Leelavathi, 3 lakh shares by Parvat Srinivas Reddy, 1,49,970 shares by P Kalpana Reddy, 3 lakh shares by Saranya Loka Reddy, 2 lakh shares by C Usha Reddy, 3 lakh shares by G Kavitha Reddy, 1.25 lakh shares by D Anitha Reddy, 2.25 lakh shares by K Shalini and 3 lakh shares by A Manogna.

Investors Fabmohur Advisors LLP and P Simhadri Reddy will also sell 57,84,300 equity shares and 90,000 shares, respectively, through offer for sale route.

MTAR has undertaken a pre-IPO placement of 18,51,851 equity shares, aggregating to Rs 100 crore with Axis and SBI mutual funds. Hence, the fresh issue size has been reduced to 21,48,149 equity shares from 40 lakh shares.

2) Price Band

The company and shareholders who are selling stake, in consultation with merchant bankers, have fixed the price band at Rs 574-575 per share for its public issue.

3) Fund Raising

The company aims to raise Rs 595.37 crore-Rs 596.41 crore at the above-mentioned price band. At higher price band, the fresh issue money would be Rs 123.51 crore and offer for sale would be Rs 472.89 crore.

4) Objectives of the Issue

The company intends to utilise the proceeds from the fresh issue towards repayments of borrowings (Rs 63 crore), working capital requirements (Rs 95 crore) and general corporate purposes.

Of the money raised from fresh issue and pre-IPO placement, Rs 63 crore will be utilised for debt repayment in FY22, while Rs 62 crore and Rs 33 crore will be used for working capital requirements in FY22 and FY23 respectively.

5) Company Profile

Incorporated in 1970, MTAR Technologies is a leading precision engineering solutions company engaged in the manufacture of mission critical precision components with close tolerances (5-10 microns), and in critical assemblies, to serve projects of high national importance, through our precision machining, assembly, testing, quality control, and specialized fabrication competencies, some of which have been indigenously developed and manufactured.

The company primarily serves customers in the clean energy, nuclear and space and defence, sectors. Over the years, we have also developed import substitutes such as ball screws and water lubricated bearings that are specialised and used in the sectors we cater to.

The company focuses on clean energy as one of its key customer sectors and is accordingly, involved in the manufacture of power units, specifically hot boxes, and in the development and manufacture of hydrogen boxes and electrolyzers, to serve Bloom Energy Inc., United States with which, it has been associated with for over nine years. In FY20 and nine months ended December 2020, revenue from customers in the clean energy sector accounted for 64.34 percent and 49.33 percent, respectively, of total revenue from operations.

In addition, it has been serving customers in the nuclear sector for over 35 years, and has established relationships with the Nuclear Power Corporation of India (NPCIL). In FY20 and nine months ended December 2020, revenue from customers belonging to the nuclear sector accounted for 14.27 percent and 27.13 percent, respectively, of revenue from operations, while space and defense sectors accounted for 18.40 percent and 20.59 percent in same periods respectively, to revenue.

The company has a long-standing relationship of over three and four decades with customers such as the Indian Space Research Organisation (ISRO) and the Defence Research and Development Organisation (DRDO) and has supplied a variety of mission critical products to them.

MTAR has seven manufacturing units including an export-oriented unit with state-of-the-art facilities each based in Hyderabad, Telangana. The company is in the process of establishing an additional manufacturing facility at Adibatla in Hyderabad which is expected to become operational in FY22.

6) Competitive Strengths

MTAR believes it has following key competitive strengths:

a) It has precision engineering expertise with complex product manufacturing capability.

b) It has wide product portfolio leading to long-standing relationships with customers.

c) It has modern technology at its state-of-the-art manufacturing facilities.

d) It has strong and diversified supplier base for sourcing of raw materials.

e) It has track record of growth in financial performance.

f) It has experienced and qualified management team.

7) Business Strategies

a) The company continues to strengthen existing product portfolio and diversify into products with attractive growth and profitability prospects.

b) The company intends to capitalise on upward trend of nuclear sector in India, increasing indigenization and policy initiatives in the defence sector, and commercialisation of Indian space sector.

c) The company intends to focus on deepening and strengthening relationships with existing customers as well as catering to new customers.

d) The company targets to expand international presence including through increase in exports.

e) The company intends to grow manufacturing capacity and increase market share through organic and inorganic routes.

f) The company continues to strive for operational efficiencies, supply chain rationalisation and effective planning.

8) Financials and Orderbook

MTAR's total income has grown at a CAGR of 16.56 percent during FY18-FY20 and EBITDA has grown at a CAGR of 37.80 percent in same period.

Its aggregate order book as on December 2020 was Rs 336.19 crore (Rs 3,361.91 million), comprising order book in the clean energy sector, the nuclear sector and the space and defence sectors of Rs 80.18 crore, Rs 93.18 crore and Rs 160.61 crore, respectively.

Historically, its order book was Rs 201.85 crore, Rs 243.74 crore and Rs 345.13 crore, as on March 2018, March 2019 and March 2020, respectively.

9) Promoters and Shareholding

The promoters of company are Parvat Srinivas Reddy, P Leelavathi, K Shalini, D Anitha Reddy, C Usha Reddy, G Kavitha Reddy, Anushman Reddy, P Kalpana Reddy, Saranya Loka Reddy, A Manogna and M Madhavi, who all held 1,42,87,337 equity shares in aggregate, representing 49.94 percent of the paid-up capital of the company.

10) Management

Subbu Venkata Rama Behara is the Chairman and an Independent Director of the company. Apart from his association with the company, he is a director on the boards of Ola Electric Mobility, Greaves Cotton and Ampere Vehicles, amongst others.

Parvat Srinivas Reddy is the Managing Director of the company. He has been a director on Board since March 11, 2015. He has over 29 years of work experience. Before his appointment as the Managing Director, he served as the managing director of Ravileela Granites and has acted as a consultant to the company.

Mathew Cyriac is the Nominee Director on the board, Venkatasatishkumar Reddy Gangapatnam is the Non-Executive Director and Praveen Kumar Reddy Akepati is the Additional Director.

Gnana Sekaran Venkatasamy, Vedachalam Nagarajan, Udaymitra Chandrakant Muktibodh, Krishna Kumar Aravamudan nad Ameeta Chatterjee are Independent Directors on the board.

Devesh Dhar Dwivedi is the Chief Operating Officer of the company. He has been associated with the company since September 2019, previously serving as Chief Financial Officer, and has been designated as Chief Operating Officer with effect from September 2020. He has over 13 years of experience in the defence, manufacturing, information technology and engineering, procurement and construction sectors, among others. Previously, he had served as the chief financial officer of High Radius Technologies, an assistant vice president with Bharat Forge, a deputy general manager with Punj Lloyd and a scientist with the Defence Research and Development Organisation.

Sudipto Bhattacharya is the Chief Financial Officer of the company. He has been associated with company since September 2020. He had previously served as a senior vice president with ACC, and a senior partner with Baker Tilly DHC Advisory LLP.