Marshall Machines Ltd. (MML) is in the business of developing, manufacturing and marketing of Machine Tool Equipment.
Business
The company was initially manufacturing hosiery machines. Later on, it moved to design & manufacture of high precision Bench Lathes, Heavy Duty Lathes & Capstan Lathes, thousands of which were sold all over the country.
The firm became a known brand in the design and manufacture of high precision bench lathes, heavy-duty lathes & capstan lathes.
It was amongst first Indian CNC Machine manufacturers and launched CNC Machines way back in 1998. In 1997, Marshall Industries entered into a technical tie-up with an American Company (M/s Path Wizard Inc.) to export the mechanical & basic electrical elements of CNC Lathes to U.S.A.
In 1998, Marshall Industries launched CNC Lathes with Siemens/Fanuc CNC Controls in India during IMTEX-98 Exhibition held at New Delhi and has been manufacturing CNC Lathes since then.
MML grew the product range to include All Geared Lathes, Multi Spindle Drilling/Tapping Machines & Special Purpose Machines.
It has become the innovative machine tool manufacturer in India and the pioneer in “Intelligent Automation”
ISSUE
To part finance its plans for capacity augmentation, up gradation of existing facility, establishment of new IOTQ center, working capital and general corpus fund needs, MML is coming out with a maiden IPO of 3870000 equity shares of Rs. 10 each at a fixed price of Rs. 42 per share to mobilize Rs. 16.25 crore.
The issue opens for subscription on 28.08.18 and will close on 30.08.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter.
Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 26.60% of the post issue paid up capital of the company.
Issue is solely lead managed by Sarthi Capital Advisors Pvt. Ltd. Bigshare Services Pvt. Ltd. is the registrar to the issue.
Having issued initial equity at par, it raised further equity in the price range of Rs. 15 to Rs. 100 per share between March 2008 and March 2018.
It has also issued bonus shares in the ratio of 4 shares for every 1 share held in May 2018. The average cost of acquisition of shares by the promoters is Rs.1.79 and Rs. 4.64 per share.
Post issue, its current paid up equity capital of Rs. 10.68 cr. will stand enhanced to Rs. 14.55 cr.
PERFORMANCE
On the performance front, for last four fiscals, MML has posted turnover/net profits of Rs. 42.57 cr. / Rs. 0.25 cr. (FY15), Rs. 43.91 cr. / Rs. 0.42 cr. (FY16), Rs. 50.54 cr. / Rs. 1.10 cr. (FY17) and Rs. 59.42 cr. / Rs. 5.00 cr. (FY18).
Thus it has posted gradual growth in top and bottom lines. However, a spurt in bottom line for FY18 is a bit surprising.
Issue is priced at a P/BV of 3.33 on the basis of its NAV of Rs. 12.62 as on 31.03.18 and at a P/BV of 1.79 based on post issue NAV of Rs.23.45.
For the last three fiscals, it has posted an average EPS of Rs. 3.22 and an average RoNW of 26.82%.
If we take into account latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 12.
This issue appears reasonably priced. But the sustainability of profitability going forward is a major concern.
As per offer documents, it has shown Macpower CNC and Lokesh Machines (though they are not strictly comparable) as its listed pers. They are currently trading at a P/Es of around 29 and 20. (as on 21.08.18)
On merchant banker’s front, this is the 42nd mandate from its stable since FY12-13 till now. Out of last 10 listings, 2 opened at par and the rest with a premium ranging from 0.71% to 20% on the day of listing.
