MTAR Technologies IPO opens today; should you subscribe for listing gains, long term or stay away?

MTAR Technologies Initial Public Offering (IPO) opens for subscription today.

MTAR Technologies Initial Public Offering (IPO) opens for subscription today. The company is looking to raise Rs 596 crore through the public issue which is an amalgamation of an Offer for Sale (OFS) by existing shareholders and a fresh issue of equity shares. MTAR Technologies, a leading maker of nuclear, defence & aerospace equipment, fabrication facilities and fuel cells. Through the issue, promoters of the company will prune their stake from the existing 62.24% to 50.25%, while public shareholding in the company will increase to 49.75% from 37.76% pre-issue.

About the issue

Investors can bid for the issue in the price band of Rs 574-575 per share, in a bid lot of 26 equity shares, translating to a minimum investment of Rs 14,950. MTAR Technologies is selling over 1 crore shares through the issue, where 50% of the quota is reserved for qualified institutional buyers (QIB), 15% if for high net worth individuals (HNI) and the remaining 35% for retail investors. The funds raised through the issue will be used by MTAR Technologies to repay or prepay its debt and funding working capital requirements. The IPO of MTAR Technologies will remain open for subscription till the end of this week.

Anchor book attracts marquee names

Ahead of the issue, MTAR Technologies has raised Rs 179 crore from anchor investors, selling 31,11,725 shares for Rs 575 apiece. Among foreign investor that picked up stake through the Anchor investment include the likes of Nomura Funds Ireland Public Limited Company, White Oak Capital, and Goldman Sachs. HDFC Mutual Fund, Axis Mutual fund, SBI Mutual Fund, ICICI Prudential Mutual Fund are some of the domestic investors who were allocated shares in the anchor book.

Views and rating

MTAR Technologies has a wide product portfolio, modern technology and state-of-the-art manufacturing facilities, a strong and diversified supplier base for sourcing raw materials, align with a track record of growth in financial performance, according to domestic brokerage firm Choice Broking. “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,” they added.

The financial performance of the company has been resilient with net sales and profit CAGR reported at 16% and 140% over the previous two financial years. On the other hand, India’s domestic precision engineering industry has registered a healthy CAGR of 7.1% over the last four financial years, hinting at strong growth for companies servicing the segment. 

“On the valuation front, the company is richly valued at ~52x FY20 EPS. From a long-term perspective, investors can consider applying for the IPO,” said analysts at Religare Broking. However, Nirali Shah, Head of Equity Research, Samco Securities holds a different view while stating that MTAR Technologies is overpriced. “Overall 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, we recommend to SUBSCRIBE to this IPO for listing gains only,” she said.

(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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