MTAR Tech makes stellar debut, lists at 85% premium over issue price

Shares of MTAR Technologies, a precision engineering solutions company, made a strong debut on the bourses, listing at Rs 1,063.90, up 85 per cent against its issue price of Rs 575 per share on the BSE on Monday. On the National Stock Exchange (NSE), the stock opened at Rs 1,050, up 83 per cent against its issue price.

Post listing, the stock zoomed 93 per cent, hitting a high of Rs 1,110 on the BSE and Rs 1,100 on the NSE. At 10:01 am, the stock was trading at Rs 1,092, up 90 per cent against its issue price. In comparison, the S&P BSE Sensex and Nifty50 index were down 1 per cent, each.

Most brokerages had recommended ‘Subscribe’ rating on the issue, on the huge growth opportunities for MTAR and a high margin business that would aid flow of profitability to the bottomline.

The Rs 597-crore initial public offering of MTAR Technologies was subscribed more than 200 times on overwhelming support from investors. The portion reserved for retail investors was subscribed 28.4 times, qualified institutional buyers category was subscribed 165 times and non-institutional category received 650.79 times subscription.

The Hyderabad-based company has precision engineering capabilities to build nuclear and pressurised water reactors, aerospace engines, missile systems, aircraft components and many such other critical components and assemblies. Proceeds from the fresh issue will be used to repay debt, fund long-term working capital requirements besides attending to general corporate purpose.

The company’s customers include some of India’s leading organisations in the nuclear, and space and defence sectors such as the NPCIL, ISRO, and the DRDO, among others. In addition, the company also supplies its products to international companies such as Bloom Energy and an Israeli defence technology company, among others.

“India has 22 operational nuclear reactors with a capacity of 6.3 GW. The country plans to double its nuclear capacity to 11.5 GW. Hence, seven new reactors are expected to come into operation in the next five years. This will create a huge opportunity for MTAR in the large refurbishment and maintenance market that is also expected to increase 1.6x. The recent ban on 101 defence based items, thrust towards indigenisation and policy initiatives towards making India an export hub for defence products will further widen the scope and addressable opportunity for MTAR,” ICICI Securities said in IPO note.

MTAR could benefit from the government's policy to construct 10 units of nuclear reactors as a single project as it will increase opportunities for domestic suppliers, said Geojit Financial Services. It added that in the next five years, the private sector is expected to receive the mandate for nearly 70 per cent of all the upcoming space missions of ISRO which is positive for MTAR.

In a post-listing comment, Jyoti Roy, DVP, Equity Strategist, Angel Broking said, “There was very strong demand for the shares given that the company is uniquely positioned catering to marquee clients like ISRO, DRDO, NPCIL, DRDO, Bloom Energy and Rafael. At CMP of Rs 1,115, the stock is trading at P/E multiples of 95.3xFY20 EPS which is expensive and captures near term growth potential thus leaving very little upside from current levels. Hence we would recommend book profits at current levels.”