Indian defense
is a sunrise industry given the impetus of the Prime Minister to substitute
several years of import reliance with domestic manufacturing. The attractiveness
of the sector has further increased as the Government has also opened up the
sector for private companies to participate in the growth story and compete for
big ticket orders. Besides, progressive easing of FDI norms from 26% to 74%
under the automatic route has further increased attractiveness of the sector
In the quest for
‘Atmanirbhar Bharat’, defense manufacturing is going to be of utmost priority,
and to augment capabilities and technology, Indian firms need access to capital
– both equity and debt.
One such company
which is soon going to debut on the bourses is Hyderabad Based M-Tar
Technologies. It is one of the many recent IPOs from this sector - and the first from the private sector in a while. The company is into precision engineering and serves a
diversified clientele including the DRDO, ISRO, Nuclear Power Corporation of
India amongst other export clients. Broadly, the co serves three sectors - Aerospace & Defence, Clean Energy and
Nuclear
For instance,
M-Tar is the supplier of Rocket engine assemblies to ISRO. The core parts for
the powerful main rocket engine and the core pumps of its cryogenic engines
required for take-off in Chandrayaan-2 mission were supplied by M-Tar. It is
also the supplier of Actuators of the wings for LCA Tejas and has also supplied
subcomponents for the Agni Missile.
(Rocket engine made by M-TAR)
Besides serving
the domestic industry, MTar has a reputed overseas clientele in defence which
includes Elbit and Rafael – two premier Israeli defence technology companies who
have a sizeable presence in India and abroad
Attached below
is a basic snapshot of the Co’s financials and the order book details -
|
Particulars (all figures in INR Crore) |
2019-20 |
2020-21 9M |
|
Revenue |
213.75 |
177.2 |
|
Operating Profit |
62.33 |
53.75 |
|
PAT |
31.3 |
28.05 |
|
Order Book |
345 |
336 |
|
M-Cap at listing |
|
1771 |
Besides this new kid on the block, there
are several other listed companies in the Indian equity markets which stand to
benefit from the entire indigenization of defence manufacturing –
It is likely that MTar’s listing will provide price discovery to all other stocks in the sector as most of them have been seeing increased prospects of business from the Indian military.
India is the second largest importer of arms
in the word (as per SIPRI) and at
the same time, has very little by way of exports. Domestic
companies are fractions in size and market cap compared to the global
counterparts and as imports are replaced with indigenous manufacturing, there
is enough potential for them to catch up to these giants in the defence
equipment market -
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