MSTC IPO kicks off: Should you subscribe?
The company is engaged in e-commerce, trading and recycling.
Here are key things you must know before considering the IPO:
The company is engaged in three major activities – e-commerce, trading and recycling. Trading is a major segment that accounts for 80-85 per cent of total revenues of the firm. The e-commerce vertical accounts for 3-7 per cent sales.
The company offers e-auction/e-sale, e-procurement services and development of customised software. It partners with different government agencies and ministries to conduct e-auctions and offers comprehensive range of services in e-procurement segment.
In the trading segment, the company sources industrial raw materials like low-ash metallurgical coke, HR coil, naptha, crude oil, coking coal, steam coal and line pipes for its clients across steel, oil and gas, power sectors.
Besides, the company is looking to set up an auto shredding plant in India via MMRPL for recycling ELVs and other white goods by converting these into shredded scrap, a vital raw material for steel plants.
The financial performance of the company is not encouraging, said Choice Broking. “Despite reporting increased transactions across the marketing and e-commerce segments, it reported a 16.2 per cent CAGR decline in top line over FY16-18, which was mainly due to sharp decline the sales of thermal coal. Reported Ebitda was at loss for the majority of the time period,” the brokerage said.
Revenues for the first half of FY19 came in at Rs 1,491.55 crore. For FY18, FY17 and FY16, sales stood at Rs 2,793.15 crore and Rs 1,876.2 crore and Rs 3307.80 crore, respectively. Revenue for the trading vertical stood at Rs 1,207.52 crore for the six months ended September 30; e-commerce vertical sales stood at Rs 104.57 crore.
No listed peer
There are no listed companies of the company in India, which are engaged in the same line of business.
- One of the leading PSU entities engaged in providing e-commerce services to customers in a most transparent, fair and secured manner
- Ability to create a virtual marketplace for any physical commercial activity thereby creating value for all the stakeholders.
- First mover advantage on account of domain expertise in providing e- commerce services thereby helping to boost business.
- Focusing on further development of e-commerce business by capturing the untapped markets.
- Foray into e-commerce-backed trading for better price discovery and transparent transactions.
- Diversifying into B2C segment, develop the recycling business.
At the upper end of the price band of Rs 121-128 per, the issue size is Rs 226 crore. With the issue, the government is looking to pare 1.76 crore shares or 25 per cent stake in a bid to meet its divestment target for the year. MSTC will offer a Rs 5.5 per share discount on the allotment price to retail investors.
“At the higher end of the price band, the company is demanding a P/S valuation of 0.4 times to its FY18 sales. Based on FY19E and FY20E sales, the issue is demanding a P/S valuation of 0.3 times. Considering the importance and positioning of its services among various government entities, favourable government policies for business growth, stable dividend payout and improvement in the financial performance, the issue seems to be attractively priced,” said Choice Broking.