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Marshall Machines NSE SME IPO review (May apply)

Review By Dilip Davda on Aug 22, 2018

 •    Known Indian brand for CNC machines.
•    Upgrading facility and augmenting capacities.
•    Pricing at 12 P/E appears challenging.
•    The sudden jump in bottom line for FY18 raises concern.

ABOUT COMPANY:
Marshall Machines Ltd. (MML) is in the business of developing, manufacturing and marketing of Machine Tool Equipment. 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'.

 
CAPITAL HISTORY/ISSUE DETAILS:
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.

FINANCIAL 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.

LISTED PEERS COMPARISION:
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)

MERCHANT BANKER’S TRACK RECORD:
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.


Conclusion / Investment Strategy

Company’s track records impressive but raising concern for sustainability of super profits shown for FY18. Looking at expansion plans, investors may consider an investment for the long term.

Review By Dilip Davda on Aug 22, 2018

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Marshall Machines IPO FAQs

  1. 1. Why Marshall Machines IPO?

    The initial public offer (IPO) of Marshall Machines Limited offers an early investment opportunity in Marshall Machines Limited. A stock market investor can buy Marshall Machines IPO shares by applying in IPO before Marshall Machines Limited shares get listed at the stock exchanges. An investor could invest in Marshall Machines IPO for short term listing gain or a long term.

  2. 2. How is Marshall Machines IPO?

    Read the Marshall Machines IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Marshall Machines IPO what should investors do?

    Marshall Machines IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Marshall Machines IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Marshall Machines IPO good?

    Our recommendation for Marshall Machines IPO is to subscribe for long term.

  5. 5. Is Marshall Machines IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Marshall Machines IPO.

  6. 6. When will Marshall Machines IPO allotment status?

    The Marshall Machines IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Marshall Machines IPO allotment status to check.

  7. 7. When will Marshall Machines IPO list?

    The Marshall Machines IPO will list on Friday, September 7, 2018, at NSE SME.