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Review By Dilip Davda on September 17, 2023
• MCL is in manufacturing plastic engineering components and subassemblies.
• It has reported minor growth in its top line but bumper margins for FY23.
• Based on its FY23 super earnings, the issue is aggressively priced.
• The tiny equity capital post IPO indicates longer gestation for migration to mainboard.
• There is no harm in skipping this pricey bet.
ABOUT COMPANY:
Master Components Ltd. (MCL) is engaged in manufacturing plastic engineering components and subassemblies. Its products are an industrial capital goods and it undergoes stringent quality tests to meet industry standards before they are delivered to clients. The proximity of its Nashik facility to Mumbai- Pune Highway, and ability to produce a comprehensive range of plastic components provides it significant competitive advantages. Due to its ability to produce multiple kinds of moulded products at a single location, the company is able to cater to various sector MNC's and smaller business associates who generally require components of different size and shapes. MCL's products are used by Electrical, Automotive, Medial and other Industrial clients. As of March 31, 2023, it had 25 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden combo IPO of 1102000 equity shares of Rs. 10 each at a fixed price of Rs. 140 per share to garner Rs. 15.43 cr. The issue consists of 700000 fresh equity shares issue (worth Rs. 9.80 cr.) and 402000 equity shares (worth Rs. 5.63 cr.). The issue opens for subscription on September 18, 2023, and will close on September 21, 2023. The minimum application to be made is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.55% of the post-IPO paid-up capital of the company. MCL is spending Rs. 1.06 cr. For this IPO process and from the net proceeds, it will utilize Rs. 6.82 cr. For working capital, and Rs. 1.92 cr. for general corporate purposes. For the overall IPO process, the company is spending Rs. 1.64 cr.
Aryaman Financial Services Ltd. Is the sole lead manager and Bigshare Services Pvt. Ltd. Is the registrar of the issue. Aryaman Group's Aryaman Capital Markets Ltd. is the market maker for the company.
The company has issued entire equity capital at par value so far and has also issued bonus shares in the ratio of 10 for 1 in December 2022. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.54, and Rs. 0.74 per share.
Post-IPO, MCL's current paid-up equity capital of Rs. 3.30 cr. will stand enhanced to Rs. 4.00 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 56.00 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, MCL has posted a total revenue/net profit of Rs. 13.29 cr. / Rs. 0.77 cr. (FY21), Rs. 18.43 cr. / Rs. 0.94 cr., and Rs. 20.90 cr. / Rs. 1.71 cr. Bumper performance for FY23 (pre-IPO year) raises concern over sustainability of margins going forward.
For the last three fiscals, MCL has reported an average EPS of Rs. 3.92, and an average RoNW of 11.89%. The issue is priced at a P/BV of xx based on its NAV of Rs. 35.31 as of March 31, 2023, and at a P/BV of xx based on its post-IPO NAV of Rs. 53.65 per share.
If we attribute FY23 super earnings to post-IPO fully paid-up capital of the company, then the asking price is at a P/E of 32.86 and on the basis of its average EPS of the last three fiscals, the P/E stands at 35.71. Thus the issue is aggressively priced.
For the last three fiscals, the company has posted PAT margins of 5.82% (FY21), 5.14% (FY22), and 8.24% (FY23).
DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, MCL has shown Bright Bros., Shaily Engg., and Mitsu ChemPlast as their listed peers. They are trading at a P/E of 00, 52.44, and 18.29 (as of September 16, 2023). However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER'S TRACK RECORD:
This is the 16th mandate from Aryaman Financial in the last three fiscals. Out of the last 10 listings, 1 opened at discount, 2 at par, and the rest with premiums ranging from 0.22% to 27.18% of the date of listing.
Review By Dilip Davda on September 17, 2023
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Master Components Limited offers an early investment opportunity in Master Components Limited. A stock market investor can buy Master Components IPO shares by applying in IPO before Master Components Limited shares get listed at the stock exchanges. An investor could invest in Master Components IPO for short term listing gain or a long term.
Read the Master Components IPO recommendations by the leading analyst and leading stock brokers.
Master Components IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Master Components IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Master Components IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Master Components IPO.
The Master Components IPO allotment status will be available on or around September 26, 2023. The allotted shares will be credited in demat account by September 28, 2023. Visit Master Components IPO allotment status to check.
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