IPO Report-Mishra Dhatu Nigam Ltd 21 th March, 2018

Transcription

1 IPO Report-Mishra Dhatu Nigam Ltd 21 th March, 2018 Issue Period 21 March March,2018 Security Type Equity Issue Size No. of Shares 4,87,08,400 Price Band Face Value 10 Market Lot 150 Minimum Bid Quantity 150 (Retail) Maximum Bid Quantity 2400 (Retail) SBI Capital Market LTD Book Running Lead Managers IDBI Capital Markets and Securities Registrar Alankit Assignments LTD Listing At BSE & NSE Main Board SME RECOMMENDATION SUBSCRIBE for Long Term Incorporated in 1973, Mishra Dhatu Nigam Ltd (MIDHANI) is a PSU engaged in the business of manufacturing of special steels, superalloys and titanium alloys in India based in Hyderabad. These high value products cater to niche sectors including defense, space and power. Company is Mini Ratna, Category-I company since 2009.Mishra Dhatu Nigam manufactures: 1. Special steels like martensitic steel, ultra high strength steel, austenitic steel and precipitation hardening steel. 2. Three varieties of Superalloys - nickel base, iron base and cobalt base. 3. Titanium alloys. Mishra Dhatu Nigam has a manufacturing facility in Hyderabad. Compant is in the process of setting up two new manufacturing facilities in Rohtak and Nellore. Company has an inhouse research and development team comprising of 14 officers. Company has 836 employees. 1

2 COMPANY S PROMOTERS Mr.Dinesh Kumar Likhi (Chairman & MD) He holds a bacholers degree from universiy of roorkee for Metallugcal engineering and the masters for the same from Sambalpur University he holds an admistrations diploma from All India Managemnt Association he holds a PhD from IIT Delhi for strategic alliance he experiance over 35 years Mr.Sanjeev Singhal [Director (Finance ) CFO ] He Holds a degree in Bcom Hounurs and a Merit recipt from ICAI Hehas expericnce over 30 years in this Field The promoter s currently holds 13,86,31,600 equity shares which is 75% of the total share capital post Issue. ISSUE STRUCTURE Offer for Sale of Equity shares Rs. 438 crores QIB: 50% of the issue NIB: 15% of the issue Retail: 35% of the issue POST ISSUE SHAREHOLDING PATTERN Post Issue Share holding Pattern 25% 75% Promoters Public 2

3 OBJECTS OF THE ISSUE Particulars 1. Amount 1. Raising funds for general corporate purposes 2. To achieve the benefits of listing the Equity Shares on the Stock Exchanges Total KEY RATIOS Particulars For the year/period ended March2015 March2016 March2017 Debt-Equity Ratio(x) Current Ratio(x) Price/Earnings Ratio(x)* RoE(%)(Return on Equity) EPS (Earnings Per Share) Book Value Per Share *Upper Price Band VALUATION Mishra Dhatu Nigam is a Mini Ratna company and a leading manufacturer of special steels, super alloys and only manufacturer of titanium alloy. The company operates in a niche segment and aims to enter into new markets of oil & gas, mining, power and fertilizers. On the upper price band of Rs 90 Mishra Dhatu Nigam is available at a P/E ratio of 13.30x of its FY17 earnings which is reasonably priced seeing the strong balance sheet and robust financials. Hence assign a SUBSCRIBE for long term rating to the issue. OUTLOOK We recommend a SUBSCRIBE for long term rating to the issue considering the major risk of dependence on the government of order inflows. 3

4 FOCUS ON RESEARCH & DEVELOPMENT TO DIVERSIFY PRODUCTS Being a high technology player in alloys industry, MIDHANI constantly invests in research and development with a focus to diversify the product portfolio, forward integration and expanding horizons to other countries. Currently, the company plans to manufacture helical compression springs for railways and aero quality carbon fibers. It also plans to manufacture tungsten powder and carbide which will help India to reduce its dependence on China in terms of imports. Currently, India imports 100% tungsten products. MIDHANI plans to increase its R&D spend going forward from current 2% to 5%, helping it to achieve better product portfolio and ensure to capture raising demand. Midhanhas invested heavily in the R&D sector for the development of new alloys thus the company gives well emphasis on the modern technology and production methods with better processing of equipment making optimum utilization of the available resources EXPANSION TO DRIVE GROWTH MIDHANI plans to put up a new manufacturing plant for manufacture and supply of helical compression springs to the Railways and aero quality carbon fibers plant along with tungsten powder and electrode plant in Rohtak and Nellore. The company has signed a memorandum of understanding for setting up a joint venture with NALCO for production of high end value aluminum alloys products at Nellore. The manufacturing unit in Rohtak will also used for manufacturing of armour products. It is also in the process of upgrading and modernizing its existing manufacturing equipments and facilities. All these expansion plans are expected to be completed in the next 3 years helping the company to achieve robust growth. The company also plans to enter in the export markets particularly countries with less competitive intensity like South East Asian countries. FY 17 Segment Wise Revenue Break Up Order Book Break Up as on 31st Jan' 18 6% 22% 72% Defence Space Others 32% 13% 55% Defence Space Others 4

5 WIDE RANGE OF ADVANCED PRODUCTS The company manufactures special steels and stainless steels, Superalloys (nickel base, iron base and cobalt base), commercially pure titanium and titanium alloys, soft magnetic alloys, controlled expansion alloys, heat resistance alloys, special purpose alloys, refractory metals and other alloys in different shapes, properties and sizes. Midhani has process capabilities across the product manufacturing value chain, including melting, forging, rolling, wire drawing, investment casting, machining and quality testing. The manufacturing facility is well integrated for manufacturing critical alloys in variety of forms such as ingots, forged bars, rings hot rolled sheets and bars, cold rolled sheets, strips and foils, wires, castings, fasteners and tubes. The company monitors all processes from the receipt of raw materials, manufacturing to packaging of products. Midhani uses high quality/pure form of raw materials to manufacture alloys ensuring high quality end-product and control on production cost. The company benefits from both economies of scale and scope with the capability to process different alloys. The wide range of products and ability to meet specific customer need enables the company to successfully service core strategic sectors such as defence, nuclear, power and aerospace. FY13-17 PAT CAGR AT 7.68% AND REVENUE CAGR AT 9.23% FY13-FY17 PAT CAGR at 7.68% FY13-FY17 Revenue CAGR at 9.23% FY-13 FY-14 FY-15 FY-16 FY FY-13 FY-14 FY-15 FY-16 FY-17 5

6 STRENGTHS Strong technological capabilities with advanced and unique facilities. Strong Clientele and quality certifications. Wide range of advanced products. Experienced and qualified core Management. RISKS & CONCERNS Risk of increase in the price of Raw materials and dependence on supply of Raw materials. The company has a single manufacturing unit in Telangana, any shutdown will have a adverse effect on its business. Lack of innovation may lead to loss of business to the company. Change in government s policy towards defence and space sector. INDUSTRY OUTLOOK High value specialty steels are premium alloy steel grades that are used across major industries such as automotive, industrial components, aerospace, defense, oil & gas etc, as functional components that are subjected to high temperature, stress and corrosive environment. These super alloys are required in majority of these components as they can be maintained in those destructive environments as they have superior resistance compared to other metals. Majority of aircrafts use titanium metal alloy since it has heavy resistance and light weight. The US is the major player in the supply of these super alloy steel and titanium metal Carbon steel, alloy, and specialty steel components used by defense contractors are critical to a country s military strength. Domestic and imported steel materials are found in virtually every military platform missiles, jet aircrafts, submarines, helicopters or munitions. Thus these super alloy and steel have a great demand for them as they have Specialty material high value specialty Steel, Super alloys and titanium alloy products are a vital segment to the defense industry, and is found on almost every application platform. The demand for high value specialty steel, super alloys and titanium alloy is estimated to be around 83,500 MT with specialty steel having the maximum contribution of around 96% followed by Super alloys with 3% demand contribution and titanium accounting for 1%. GLOBAL STEEL MARKET 6

7 COMPARISON WITH LISTED INDUSTRY PEERS There are no listed peers in the similar line of business. SUMMARY STATEMENT OF ASSETS AND LIABILITIES Y/E (`Crore) FY-2015 FY-2016 FY-2017 Share Capital Reserves & Surplus Net Worth Non Current Liabilities Current Liabilities Total Liabilities Non Current Asset Long Term loans & Advances Other Non current Assets Current Assets Cash & Cash Equivalent Total Assets SUMMARY STATEMENT OF PROFIT & LOSS Y/E (`Crore) FY-2015 FY-2016 FY-2017 Net Sales Growth (%) 16% 6% Employee Expenses Other Expense Total Expenses EBITDA Growth (%) 19% 23% EBITDA Margin (%) 17% 17% 20% Depreciation Interest Other Income PBT Tax Expense Net Profit Growth (%) 20% 6% 7

8 STATEMENT OF CASH FLOWS Particulars ( ` Crore) FY-2015 FY-2016 FY-2017 Net Cash from Operating Activities Net Cash Used in Investing Activities (9.49) (106.67) (64.85) Net Cash Used in Financing Activities (42.89) (90.27) (42.52) HAPPY INVESTING!! The TEAM Offer Open's on 21 March 18 Offer Closes on 23 March18 Finalization of Allotment 28 March 18 Unblocking ASBA 02 April 18 Credit to Demat A/c. 03 April 18 Listing on Stock exchange 04 April 18 Tel No: Id: research@ajmera.co.in AJMERA x-change Disclaimer: The information contained in this report is obtained from reliable company s sources and is directed at market professionals and institutional investors. In no circumstances should it be considered as an offer to sell/buy or, a solicitation of any offers to, buy or sell the securities or commodities mentioned in this report. Ajmera, and/or its affiliates, may or may not have position in securities mentioned in this report. No representation is made that the transactions undertaken based on the information contained in this report will be profitable, or that they will not result in losses. Ajmera Associates Ltd and/or its representatives will not be liable forth recipients investment decision based on this report. For details refer website. 8