State-owned MSTC’s Rs 226-cr IPO opens today; should you subscribe?

The company will get the first mover advantage on account of domain expertise in providing e-commerce services thereby helping to boost its business. It has a robust, advanced and scalable technology platform.

State-run e-commerce company MSTC plans to raise Rs 226 crore through the initial public offer that will open for subscription on March 13 and will close on March 15.

The company has fixed the price band of Rs 121-128 per equity share and has proposed to offload 1.76 crore shares or 25 percent of total paid-up equity, through the initial stake sale.

After the IPO, the government’s stake in the firm will come down to 64.85 percent from 89.85 percent, thereby making MSTC compliant with the minimum public shareholding norms for listed companies, the release said.

The employee and the retail discount is Rs. 5.5 per share on the offer price. Since the issue is fully OFS, the company will not receive any proceeds from it.

It is one of the leading PSU entities engaged in providing e-commerce services to customers in a most transparent, fair and secure manner. It has the ability to create a virtual marketplace for any physical commercial activity thereby creating value for all the stakeholders, suggest experts tracking the issue.

The company will get the first mover advantage on account of domain expertise in providing e-commerce services thereby helping to boost its business. It has a robust, advanced and scalable technology platform.

“There is no listed entity operating in the similar line of business as of company. At the higher price band of Rs 128, MSTC’s share is valued at a P/S multiple of 0.4x (to its FY18 sales),” Choice Broking said in a note.

“On the valuation front, at higher price band, the company is demanding a P/S valuation of 0.4x (to its FY18 sales). Moreover, based on FY19E and FY20E sales, it is demanding a P/S valuation of 0.3x,” it said.

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, Choice Broking is of the view that the issue seems to be attractively priced and it adivises to subscribe.

Here are key things to know about the company:

Incorporation:

Incorporated in 1964, as a trading company to deal in the export of scrap, MSTC has grown into a large diversified, multiproduct service and trading company. The company was a canalising agency for import of ferrous scrap until 1992.

After decanalisation, it has established itself as one of the leading e-commerce service providers in the country and also as one of the major players in trading of bulk raw material.

E-commerce:

MSTC is one of the leading PSU entities engaged in providing e-commerce related services across diversified industry segment offering e-auction/e-sale, e-procurement services and development of customised software/solutions.

The company has emerged as a pioneer in the e-auction segment catering to the government sector, partnering with different government agencies and ministries in conducting e-auctions. It is one of the key players offering a comprehensive range of services in e-procurement segment.

Trading:

The trading division is engaged in import as well as domestic sourcing of bulk industrial raw material for actual users as well as traders. This division looks after sourcing, purchase and sale of industrial raw materials like low ash metallurgical coke, HR coil, naptha, crude oil, coking coal, steam coal, line pipes, etc. on behalf of its customers.

Recycling:

To expand its spectrum of operation and to support the steel industry in India, in FY17, MSTC through Mahindra MSTC Recycling Pvt Ltd (MMRPL) forayed into the recycling sector.

MMRPL is poised to set-up an organised state-of-the-art auto shredding plant in India for recycling “End of Life Vehicles” (ELV) and other white goods by converting these into shredded scrap, which is a vital raw material for steel plants.

A collection and dismantling centre with state-of-the-art technology has been set up in Greater Noida (Uttar Pradesh) as a supply feedstock for the auto shredding plant.

Financial performance:

On the back of increased transactions across the marketing and e-commerce segment, the company reported a 34.7 percent CAGR rise in the service charge over FY16-18 to Rs 2,75.62 crore in FY18.

However, due to the sharp decline in the sales of thermal coal, business from the sales of goods declined 23.8 percent CAGR to stand at 15,65.24 crore in FY18.

Consequently, consolidated operating revenue declined 16.2 percent CAGR over FY16-18 to Rs 22,65.40 crore in FY18. In H1 FY19, consolidated top-line stood at Rs 14,76.90 crore.

Disclaimer:-The views and investment tips expressed by investment experts are their own. Ripples Advisory advises users to check with certified experts before taking any investment decisions.

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