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Choice Equity Broking IPO report on MTAR Technologies

MTAR Technologies Ltd. (MTAR), the maker of nuclear, defence & aerospace equipment, fabrication facilities and fuel cells is planning to raise up to Rs. 5,950mn through an IPO, which opens on 3rd Mar. and closes on 5th Mar. 2021. The price band is Rs. 574 - 575 per share. • On 16th Feb. 2021, MTAR has undertook a pre-IPO placement of 1.85mn equity shares at Rs. 540 each, aggregating to Rs. 1,000mn. • The issue is a combination of fresh and OFS issue. The company will not receive any fund from the OFS portion. Of the net proceeds from the fresh issue and from the pre-IPO placement, Rs. 630mn will be utilized for repayment/prepayment of the borrowings availed by it. Additional, Rs. 950mn will be used to fund the working capital requirement of the company. Residual amount will be used for general corporate purposes.

Valuation and Outlook

At higher price band of Rs. 575, MTAR is demanding a TTM P/E multiple of 56.5x (to its restated TTM EPS of Rs. 10.2). Considering the presence in the growth sectors like clean energy and space & defence sector and improving return ratios, we feel the demand valuation to be attractive. Thus we assign a “SUBSCRIBE” rating for the issue.