MTAR Technologies IPO
| Case Code: FINC184 Case Length: 10 Pages Period: 1970-2021 Pub Date: 2021 Teaching Note: Available |
Price: Rs.300 Organization: MTAR Technologies Industry: Industrial Goods & Machinery Countries: India Themes: Investment Decisions Investment Philosophy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Industry Profile and MTAR Technologies
The Indian engineering segment was divided into two segments i.e. the heavy engineering segment and the light engineering segment. The heavy engineering segment comprised manufacturing and assembling of industrial equipment for use in different industries. The industrial equipment had applications in industries like fertilizers, textiles, oil and gas, nuclear power projects, etc..
Growth Drivers of MTAR
One of the key strengths of MTAR was its long history of functioning in the precision industry. It had been operational in the industry since 1970, and had around 50 years of experience in it. This indicated the strong acumen of the management of MTAR. Over the years, MTAR had been successful in meeting the demands and requirements of the customers as well as expanding into the global markets. Besides, it had strong infrastructure and technical capabilities to meet the requirements of the customers. It operated through seven plants across the city of Hyderabad, and was in the process of establishing its eighth unit to cater to the requirements of manufacturing fabrication material. The unit was expected to be operational by the financial year 2021-22..
Challenges and Risk Factors
One of the significant issues that MTAR was facing was its debt composition. The debt increased from Rs.2000 million in the year 2017-18 to Rs.3000 million by the end of the financial year 2019-20, and doubled during the first 9 months of the financial year 2020-21 to reach around Rs.6,730 million by the end of December 31, 2020 . The management of MTAR had mostly relied on external source of financing to meet their operational and capital expenditure requirements (Refer to Figure-I for Debt-Equity Ratio of MTAR Technologies). The debt was expected to have an impact on the operational performance and financial position of the company. The working capital requirements of the company were estimated to be around Rs.3100 million for the financial year 2020-21. Another critical area with respect to MTAR was the concentration of customer base in the revenue composition ..
Road Ahead
The precision engineering segment was expected to witness a Cumulative Annual Growth Rate (CAGR) of 6% to 7% between the fiscal years 2020 and 2025, and it was projected to reach Rs.5,550-6,550 billion in fiscal 2025 . The major growth factors for the industry were demand for the auto-components, both in domestic markets and exports, and the demand for indigenously developed defense products. The precision engineering segment had already contributed significantly to overall engineering exports, accounting for 30% to 35% of the total engineering exports . ..
Exhibits
Exhibit I: Timeline of Events at MTAR Technologies
Exhibit II : List of Products, Services and Customers of MTAR Technologies
Exhibit III : Snapshot of Key Financial Metrics of MTAR Technologies
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