Mishra Dhatu Nigam Limited

Started in 1973, Mishra Dhatu Nigam Ltd is Hyderabad based, one of the leading manufacturers of special steels, Superalloys and only manufacturer of titanium alloys in India. These are high value products which cater to niche end user segments such as defence, space and power. Company has emerged as a 'National Centre for Excellence' in advanced metallurgical production of special metals and Superalloys in India. Company has the technological ability to manufacture a wide range of advanced metals and alloys under one roof. With the growth of its business and operations, it have achieved the status of a Mini Ratna, Category-I company in 2009. MIDHANI is one of the few metallurgical plants of its kind in the world, designed to manufacture a wide range of special metals and alloys using integrated and highly flexible manufacturing systems. Company manufactures unique combinations of metal and alloys. These special alloys have superior mechanical properties and better workability which are essential for special applications in aerospace, power generation, nuclear, defence and other general engineering industries. Its products are key ingredients for strategic sectors in India, which typically cannot be imported from other countries due to its national security related concerns. Company manufactures special steels like martensitic steel, ultra high strength steel, austenitic steel and precipitation hardening steel. It manufactures three varieties of Superalloys – nickel base, iron base and cobalt base. It also manufactures varieties of titanium alloys. Most of the orders executed by its Company are in the nature of an import substitute. Presently, it conducts operations at its manufacturing facility in Hyderabad. MIDHANI is in the process of setting up two new manufacturing facilities in Rohtak and Nellore. It has research and development laboratory which is accredited to National Accreditation Board for Testing and Calibration Laboratories and a team of 14 officers. As of September 30, 2017, company has 836 employees. As of 31.10.17, company has order book of 620 cr.  On performance front, MIDHANI has posted turnover/net profits of Rs. 573.75 cr. / Rs. 82.52 cr. (FY13), Rs. 575.55 cr. / Rs. 82.46 cr. (FY14), Rs. 678.39 cr. / Rs. 100.76 cr. (FY15), Rs. 790.45 cr. / Rs. 119.89 cr. (FY16) and Rs. 833.09 cr. / Rs. 39127.29 cr. (FY17). For H1 of FY18, it has reported net profit of Rs. 29.09 cr. on a turnover of Rs. 220.66 cr. Thus company has posted consistent growth over last couple of years. Decrease in revenue for H1 of FY18 is due to delay in supplies from external sources, including receipt ofoutsourced production back from its sub-contractors, as well as reversal of sales of approximately Rs 44.0 cr. MIDHANI has posted an average EPS of Rs. 6.38 and average RoNW of 18.45% for last three fiscals. Issue is priced at a P/BV of 2.30 on NAV of 39.15 as on 30.09.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 31. As per DRHP documents, there is no listed peers. On BRLM's front, two merchant bankers associated with this issue and have handled 21 public issues in the past three years. From recent 10 IPOs, 1 issue closed below its offer price on listing date. As per financials, company's growth is consistent, RoNW is 18.45% for last three fiscals and issue is priced at P/E of around 31 as per latest earnings. Company is manufacturer of special steels, Superalloys and only manufacturer of titanium alloys in India. Going forward, there is likely to be an increase in demand for special metals and alloys on account of government initiatives such as Make in India that will boost defence production and heavy equipment manufacturing in India, which will indirectly lead to an increase in demand of its products. So we give SUBSCRIBE rating to this IPO.

• 1 President of India acting through the MoD, Government of India.