MTAR Technologies IPO: Grey market premium soars 85% on last bidding day; should you subscribe?

MTAR Technologies additionally raised pre-IPO money value Rs 100 crore at Rs 540 per share from SBI MF and Axis MF. Image: MTAR Tech web site

Hyderabad-based MTAR Technologies Rs 596-crore preliminary public providing (IPO) has been subscribed 12.77 instances thus far on the last of the bidding course of. The IPO has obtained bids for 9.83 crore fairness shares in opposition to a proposal dimension of 72.6 lakh fairness shares, translating right into a subscription of 10.27 instances, information out there on the exchanges confirmed. In the gray market, MTAR Technologies shares have been commanding a robust gray market premium of 85 per cent over the problem value of Rs 575 apiece on Friday. The shares of precision engineering options company have been buying and selling at Rs 1,060 per share within the gray market, implying an upside of Rs 485 apiece. ” As it has been commanding an excellent gray market premium, the provide is prone to sail by,” mentioned Nirali Shah, Head of Equity Research, Samco Securities.

Analysts at Anand Rathi Research have really helpful to ‘subscribe’ to MTAR Technologies challenge, contemplating the company’s experience in offering a variety of precision engineering merchandise with complicated manufacturing functionality, excessive entry barrier, robust stability sheet and administration. At the higher finish of the IPO value band, it’s supplied at 45.32x its TTM earnings, with a market cap of Rs 1,769 crore.

Nirali Shah echoed an identical view, recommending to ‘subscribe’ to the problem for itemizing beneficial properties solely. Shah believes that the federal government’s efforts to spice up the manufacturing sector and ‘Make in India’ marketing campaign will drive development. On the dangers entrance, the company derives over 80 per cent of its income from its prime three clients and 49 per cent of income from Bloom Energy resulting in focus danger. “Besides, it does not have any long term contracts with its clients. Overall, MTAR is overpriced at a FY20 P/E of 57.5 times,” she mentioned.

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MTAR Technologies additionally raised pre-IPO money value Rs 100 crore at Rs 540 per share from SBI MF and Axis MF. The funds raised shall be utilised to repay debt and fund working capital. Sneha Poddar, Research Analyst, Motilal Oswal Financial Services, has given a ‘subscribe’ ranking to the problem for the long-term. Further. Poddar mentioned that given the present buoyant market and excessive curiosity for defence shares, the problem might see itemizing beneficial properties as nicely.

At the higher value band of Rs 575, the problem is priced at a 41 P/E ratio and 6.26x P.BV which may be very costly, says Aditya Kondawar, Founder and COO, JST Investments. The costly valuations and the market froth has made Kondawar cautious of this IPO. MTAR has mentioned that the following two years they need to develop at 40 per cent per year as in opposition to 16 per cent CAGR over the last 4 years. “We would like to monitor the key deliverables and hence for the long term, we have no view on the IPO. For the short term, it seems that the company will list at a good premium given its strong grey market premium,” Kondawar added.

(The suggestions on this story are by the respective analysis and brokerage agency. Financial Express Online doesn’t bear any duty for his or her funding recommendation. Please seek the advice of your funding advisor earlier than investing.)

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