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There is a scene in the movie Mission Mangal, where the lead actors are seeing-off the rocket launcher towards the launch pad. This scene shows the emotions the lead scientists were going through. There was a sense of achievement, a sense of pride, a taste of success, a realization that all the sacrifices they made were worth it. A similar thing must have happened in this company when the employees would have sent the shipment carrying the engine of PSLV-C25 - a vehicle that launched the Mars Orbiter in space.
I somehow cannot stay away from the filmy keeda :D, lets get back to why we are here – MTAR. The 24th IPO for the year 2020-21. MTAR Technologies is a major player in developing and manufacturing a wide range of vital precision engineering components. The company operates majorly in 4 industries – Clean energy, Nuclear, Space, and Defence. We have already covered a lot of aspects in the live stream, here we will take a look at the 5 strengths and 5 weaknesses of the company. This will be helpful for you to decide – whether to apply for the IPO or not? Let’s go:
Strengths of the Company:
1.Expertise in precision engineering:
In the video, we have understood in detail what precision engineering is about. This company carries expertise in the field. The company’s capability in measuring and maintaining quality is a key enabler. It is equipped with tools for dimensional and geometrical inspection to establish micron level adherence to specifications as set by its customers.
2.Auto creation of Entry barriers:
The business that the company operates in requires high positional and dimensional accuracy. The company’s long experience in manufacturing these machines and components along with heavy process-specific asset creation has not only provided a good learning curve to the company but also has, in the process, created entry barriers for other players.
As of March 31, 2020, 64.53% of the company’s revenue from operations came from a single customer – Bloom Energy. We can say that the company is over-dependent on them.
2.Domestic Sales depends on budgetary allocations:
NPCIL, ISRO, DRDO, etc form the major chunk of the company’s domestic customer base. A decline or reprioritization of funding in the Indian budget towards the respective departments of the Government of India under which these customers operate or delays in the budget process could adversely affect the company’s financials.
3.The liberalization of the defense or space sectors:
The liberalization of the defense or space sectors by the Government to allow the entry of private and foreign companies may increase the level of competition the company faces.
4.Strict quality requirement:
The company operates in the precision engineering industry. This industry has very strict quality requirements. It is necessary to ensure adherence to the same which can be costly. Also, errors in this space can cause significant damage. Although the company has not yet faced such a situation, we must be aware of what could happen in such scenarios.
5.Exchange rate fluctuations:
In the first point, we have mentioned that Bloom Energy Inc. a US-based company is a major contributor to the company’s revenue. For the year ended March 31, 2020, the revenue from contracts with customers located outside India amounted to ₹ 1,408.82 million, reflecting 67.58% of the total revenue from contracts. So, any fluctuation in the currency exchange rate would result in a significant impact on the company’s financials.
These are the few points one must consider before investing in the IPO. I hope you are now aware of the finer details of the company. On a weighing scale, the strengths appear slightly heavier as compared to the weaknesses. You can read the details regarding the company in Red Herring Prospectus. If you have not watched the video you can find the link below.
Jai Hind! Take Care! & Bye Bye!