MSTC IPO recommendations: Analyst view explained

THE IPO of MSTC – a Mini Ratna under the Ministry of Steel – is open for subscription. Although there is a discount of INR5.5 per share on the price band of INR121 – 128 per share for retail and employee investors, the public offer garnered poor response on the first day. A few brokerage houses have released reports about the company’s IPO. Here is a sampling of MSTC IPO recommendations and analyst views:

Choice Broking is positive about the prospects of the company and has recommended investors to subscribe to the offer. “On 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. Considering the importance and positioning of its services among various government entities, favorable government policies for business growth, stable dividend payout and improvement in the financial performance, the issue seems to be attractively priced. Thus, we assign a “SUBSCRIBE” rating to the issue,” noted the Mumbai-based firm in its report.

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Hem Securities also expressed optimism about MSTC’s future while stating that provision against bad debts will not be there in future.“The company is bringing the issue at p/b multiple of approx. 2.63 at higher end of price band of Rs 128/share. Although company is one of the leading PSU entities engaged in providing e-commerce services but loss making financials are acting as a dampener. However as losses are mainly attributed to provisions which will not be the case in future but still at present point of time fundamentals are not infusing optimism & dependent on future performance by company. Hence, barring risk averse investors, we recommend “Long term Subscribe” on issue,” said its IPO note.

MSTC IPO recommendations: Analysts not unanimously positive

However, not everybody is enthused and Angel Broking is Neutral on the IPO. “Considering the company’s business segments like Ecommerce, Trading & Recycling through MMRP, which mainly cater to the commodity sectors (not very attractive). Moreover, given the instability on the topline front coupled with losses on bottom-line front, we recommend NEUTRAL rating on the issue,” said the research note.

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SMC Global Securities rated the IPO at 1.5 stars out of maximum 5. “MSTC’s fortunes are closely linked with its trading business which is driven by the requirements of other government departments and government controlled entities. The company has incurred losses in the last few years due to bad debt adjustments and deferred tax thereon. Moreover, the company has experienced negative cash flows in the past. Any negative cash flow in the future could adversely affect the results of operations and financial condition. A risk taking investor may opt the issue for long term.” said the brokerage house in its IPO note.

MSTC IPO recommendations: Analyst view explained
4.4 (88%) 5 vote[s]

Krishna Bagra

Coming from a family of investors and financial analysts, Krishna learnt wading through regulatory filings pretty early in her career. At IPO Central, Krishna plays twin roles of contributor and head of research desk. She can also be reached at +krishnabagra .

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