MSTC Limited

Started in 1964, Kolkata based MSTC Limited is a public sector unit (PSU) involved in the trading of bulk raw material and e-commerce service provider to government and government-controlled entities. The company was previously a canalizing agency (an enterprise created specifically to import and/or export of ferrous scrap) until 1992. After de-canalisation it has established itself as an e-commerce service provider and a major player in trading of bulk raw material. In FY 2017, the company entered into the recycling business through a 50:50 joint venture with Mahindra Intertrade Ltd (a subsidiary of Mahindra Vehicle Manufacturers Ltd) by forming a new company Mahindra MSTC Recycling Pvt Ltd (MMRPL). This new firm is in the business of auto shredding, processing of end of life vehicles (ELVs), other white goods and products for the production of iron and non-iron shredded scrap. The 3 main business verticals in the company are:(i) E-commerce, (ii) Trading of bulk raw material(iii) Recycling through MMRPL. Since 2002, the company is offering e-auction platforms to many Government and Government controlled entities. As on December 31, 2018, MSTC has conducted over 1,90,000 auctions, serving over 1,10,000 users. It has conducted 28,600 auctions/events during 2018 and 30,500 auctions/event for nine months period ended December 31, 2018. MSTC was the company behind developing E-RaKAM portal, a digital initiative bringing together the farmers, FPOs, PSU, civil supplies and buyers on a single platform for selling and buying of agricultural products. MSTC has a country-wide footprint with 4 regional offices located in Delhi, Mumbai, Kolkata and Chennai, 13 branch offices in major cities of India and 3 site offices. As per financial performance, MSTC has posted total income/net profits of Rs. 3307.80 cr. / Rs. - (265.84) cr. (FY16), Rs. 1876.20 cr. / Rs. 133.41 cr. (FY17) and Rs. 2793.15 cr. / Rs. - (9.79) cr. (FY18) . For upto H1 of FY19, it has reported net loss of Rs. - (12.19) cr. on total revenue of Rs. 1491.55 cr. So company has posted mixed results and never remain consistent in top-line and bottom-line. As per RHP, the company has incurred a loss for half-year period ended on September 30, 2018, Fiscal 2018 and Fiscal 2016 respectively based on the Restated Financial Statements. The said losses are primarily due to bad debts being written off and provisioning done for other bad and doubtful advances and debts. MSTC has posted an average EPS of Rs. 0.28 and average RoNW of - (2.55)% for last three fiscals. Issue is priced at a P/BV of 2.78 as per NAV of 46.58 on 30.09.18. As per RHP, there is no listed peers.  On BRLM's front, for ITI Capital Limited this is the 3rd IPO in last three fiscals and from last 2 IPOs, one opened below issue price and another above issue price. As of now, from last 2 IPOs, one is trading below issue price and remaining above issue price. ( As on 22.01.19 ) As per financials, company's has shown mixed results, RoNW is - (2.55)% for last three fiscals. Company is in the trading of bulk raw material and e-commerce service provider to government and government-controlled entities. The e-Commerce platform of Company has good growth potential. Also the stock will list in T-Group. For BRLM, this is just 2nd IPO. So we give NEUTRAL rating to this IPO.

• 1 The President of India, acting through the MoS