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Review By Dilip Davda on March 20, 2018

MMP Industries Ltd. (MMPIL) is engaged in manufacturing of aluminium products that includes pyro and flake aluminium powders, atomised aluminium powders, aluminium pastes, aluminium conductors (all aluminium, alloy aluminium and aluminium steel reinforced). Its  Unit I and Unit IV (NPM Industries) are engaged in the manufacturing of aforesaid Products, Unit III (Mars Industries) is engaged in the manufacturing of manganese oxide and di-oxide powders and Unit II (H.M. Engineering) is engaged in job work of sheet metal components for Group Entity, Star Circlips & Engineering Limited.

Aluminium powders (pyro, flake and atomised) are used in many industrial sectors like construction (AAC Blocks) and mining (Aluminised slurry explosives), agriculture (pesticides), defence (ammunition), fire crackers, railways (Thermit portions) etc. Aluminium pastes are used in automotive, decorative and industrial paints. Aluminium Conductors are consumed by the power sector for laying of overhead transmission lines. MMPIL has entered into a Joint Venture with Toyo Aluminium K.K. of Japan for the manufacturing of specialty aluminium pastes in a new company ?Toyal MMP India Private Limited. Its  association with Global Industry leader ?Toyo Aluminium K.K., Japan would help in moving up the value chain alongside technological support. Company holds 26% shareholding in this JV Company. The commercial production in this unit has already commenced in February 2018.

From a start-up capacity of 300 MTPA in 1983 of pyro and flake aluminium powders, the capacity presently is 7,860 MTPA. In addition, Atomised powder capacity is 7,200 MTPA including for captive consumption and aluminium paste capacity of 1,500 MTPA. The aluminium conductor capacity is presently 7,200 MTPA. Company is constantly adding more capacities for Powder and Conductors to meet the growing demand of its products. In addition, it holds shareholding in Star Circlips & Engineering Limited (26.06%). Star Circlips & Engineering Limited is the manufacturer of Circlips, retaining rings, washers, shims and formed components mainly used in auto and auto component industries.

To part finance setting up of new facilities for manufacturing atomized aluminium powder, pyro and flake aluminium powder, aluminium foils, repayment/pre-payment of certain debts, working capital and general corpus fund needs, MMPIL is coming out with a maiden IPO of 4500000 equity shares of Rs. 10 each via book building route with a price band of Rs. 186 – Rs. 188 to mobilize Rs.83.70 cr. – Rs. 84.60 cr. (based on lower and upper price bands). Issue opens for subscription on 28.03.18 and will close on 04.04.18. Minimum application is to be made for 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Guiness Corporate Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.57% of the post issue paid up capital of the company.  Except for few shares at Rs. 45 per share in June 1995, it has raised all other equity at par and has also issued bonus shares in the ratio of 1 for 1 (March 1993), 3 for2 (March 1994), 1 for 1 (March 1996) and 1 for 2 (Sept. 2017). Average cost of acquisition of shares by the promoters is Rs. 6.12 per share. Post issue, its current paid up equity capital of Rs. 12.44 cr. will stand enhanced to Rs. 16.94 cr.

On performance front, MMPIL has posted turnover/net profits of Rs. 121.73 cr./ Rs. 2.51 cr. (FY14), Rs. 157.64 cr. / Rs. 3.71 cr. (FY15), Rs.181.21 cr. / Rs. 7.78 cr. (FY16) and Rs. 203.93 cr. / Rs. 13.84 cr. (FY17). For the first half of the current fiscal, it has earned net profit of Rs. 8.40 on a turnover of Rs. 105.56 cr. For last three fiscals, it has posted an average EPS of Rs. 8.15 and an average RoNW of 28.04%. Issue is priced at a P/BV of 4.76 on the basis of its NAV of Rs. 39.52 (standalone) as on 30.09.17. However, on a consolidated basis with share of profits from JVs it has posted net profit of Rs. 8.88 cr. (FY16), Rs. 16.56 cr. (FY17) and Rs. 8.06 cr. (first half of FY18) on the same turnover as standalone. If we annualize latest (consolidated) working and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 20 against industry average of 35. It has shown Maan Aluminium and Manaksia as its listed peers and are trading at a P/E of 8 and 26 respectively (as on 19.03.18). Based on these parameters, issue appears reasonably priced.

On merchant banker’s front, this is the 27th mandate from its stable in last three fiscals. Out of last 10 listings, 1 opened at discount to offer price, 1 at par and the rest eight with a premium ranging from 2.6% to 25% on the day of listing.

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