Blog

MSTC Ltd. IPO
Comments0

 

Offer Details

MSTC Ltd.

Price band

Rs. 121-128

Offer Open Date

13th March, 2019

Offer Close Date

15th March, 2019

Lot Size

90 shares

Shares on Offer

1.76 crore shares

Face value

Rs. 10

Offer Size

Rs.213.81 cr – 226.18 cr

Book Building

QIBs

75%

Non-Institutional

15%

Retail

10%

Lead Managers

Equirus Capital Pvt.Ltd

Exchange

BSE

Capital Structure

Pre Issue Equity

Rs. 70.40 cr

Post issue Equity

Rs. 70.40 cr

 

Established on September 9, 1964 at Kolkata as a regulatory authority for the export of iron scrap, MSTC (Metal Scrap Trade Corporation) Limited is a Miniratna Category-I Public Sector Undertaking under the administrative control of the Ministry of Steel, Government of India. It was a canalizing agency for importing iron scrap and breaking old vessels until 1992.

The Government currently holds 89.85% stake in the company and has offered to sell 17,670,400 Equity Shares by President of India acting through Ministry of Steel, Govt of India. After de-canalization, it has built up itself as one of the leading e-commerce service providers in the nation and furthermore is one of the major players in trading of bulk raw material.

MSTC entered into the recycling business through a 50:50 joint venture with MIL (Mahindra Intertrade Ltd) for setting up a shredding plant and collection centres across the country. In an outline, it can be said that there are three fundamental business verticals namely, 1. Trading 2. E-commerce 3. Recycling through MMRPL.

Company forays into following business verticals:

  1. The Trading division is engaged in import as well as domestic sourcing of bulk industrial raw material for actual users as well as traders. This division looks after sourcing, purchase and sale of industrial raw materials like low ash metallurgical coke, HR coil, naptha, crude oil, coking coal, steam coal, line pipes etc. on behalf of customers. They are mainly catering to customers across steel, oil and gas, power sectors in private and public sector.
  2. E-commerce: MSTC is one of the leading PSU entities engaged in providing e-commerce related services across diversified industry segment offering e-auction/e-sale, e-procurement services and development of customized software/solutions. In the e-auction segment, it caters to the Government sector, partnering with different Government agencies and ministries in conducting e-Auctions. It is one of the key players offering comprehensive range of services in e-procurement segment. Company has also launched M3 MSTC Metal Mandi (“M3”), a virtual marketplace for the trading of metals, ores, engineering goods, and other products. It essentially provides a one stop platform for sellers and buyers, displaying the products and offerings of MSMEs. There is no registration fee for either sellers or buyers. Instead, it generates income from this project by instituting a markup based on the tonnage of items sold and purchased.
  3. Recycling: To expand spectrum of operation and to help the steel industry in India, in FY 2017, MSTC through MMRPL (Mahindra MSTC Recycling Private Limited) forayed into the recycling sector. MMRPL is poised to set up best in class auto shredding plant in India for recycling ELVs and other white goods by converting these into shredded scrap which is a vital raw material for steel plants.

Objects of Issue:

  1. To carry out the disinvestment of 17,670,400 equity shares by the selling shareholder in MSTC constituting 25.10% of MSTC’s pre-offer paid up Equity Share capital;
  2. To achieve the benefits of listing the equity shares on the stock exchanges.

MSTC will not receive any proceeds from the offer and all proceeds shall go to the selling shareholder i.e. the Government. This step is part of government’s planned divestments target before the general elections take place.

Strengths:

MSTC is one of the leading PSU entities engaged in providing e-commerce services to customer services across diversified industry segment offering e-auction/e-sale, e-procurement services and development of customized software/solutions. Currently, it has following strengths:

  1. Its capability to create a virtual marketplace for any physical commercial activity: MSTC has conducted e-auction of variety of materials for example coal, minerals, scrap and as of lately, items such as onion, litchi, black pepper, pineapple, hill-grass in agriproducts, tendu leaves, timber, sal seed in forest products, human hair, fly-ash etc.
  2. First mover advantage by virtue of domain expertise in providing e-commerce services: MSTC has been commanded to conduct e-auction for sale of iron ore from Karnataka and allocation of coal blocks and mineral blocks of Iron ore, Limestone, Tungsten, Diamond, Gold, Bauxite Blocks in various states. They likewise created E-RaKAM (e-Rastriya Kishan Agri Mandi) portal which is supported by their marketing and logistic partner CRWC Limited for bringing together the farmers, FPOs, PSU, civil supplies and buyers on a single platform to facilitate selling and buying process of agricultural products.

When analyzing, there are following opportunities and threats for MSTC’s business:

Opportunities

  1. E-commerce: MSTC is a major standalone e-commerce service provider in the country. With its foray into new and diverse business verticals including the flagship projects of the Govt. of India, there is enormous potential to develop multifold in this field.
  2. Recycling sector: MSTC is spearheading the activities of framing a recycling policy, its pivotal role in setting up recycling plant in the automobile sector & e-waste and JV with MIL, opens many opportunities for the company to be the front runner holding the torch for growth.
  3. Foreign Footprints – Exim of petroleum products: MSTC developed an exclusive gateway for the import and export tenders for IOCL for its petroleum products digitizing the whole procedure with its complexities. . They have built up the e-bidding platform for this project for providing facility to airline operators to submit their proposals for flying airlines between routes and networks between different airports and to quote viability gap funding required to operate flights between these airports. The portals services are to be extended to its overseas Joint Venture to make its footprints overseas in the days to come.

Threats

  1. GeM portal – reducing opportunity in exposure: With the Govt.’s mandate to use the GeM Portal for purchases, the business in e-procurement of goods will take a hit. The scope of work in e-procurement gets a bit scaled back, as a major percentage of any corporation’s business is spent on procurement of merchandise.
  2. Trading business: As a policy matter, MSTC plans to go safe in the traditional trading business due to the extent of risk involved. Though it is trying to resurrect the same, the slowness of the economic growth and the exponential increment in NPAs etc has destabilized the credit system and it poses a difficult situation.

Key risks:

  1. Pricing pressure from MSTC’s rivals which may require company to reduce prices to stay competitive.
  2. Any unfavorable changes in central or state government policies in connection to e-commerce business.
  3. Company along with its subsidiary is associated with certain outstanding legal proceedings, which if determined adversely, may negatively influence the business, financial condition, results of operations and prospects.
  4. Company’s dependency on select clients for significant portion of its revenues in trading line of business.

Disclaimer

Author Image

Comment

Recent Post

  • PC Jeweller Demerges its Expo..

    What’s the deal? PC Jewelers recently announced that it would demerge its Export Division and merge with its wholly owned subsidiary - PCJ Gems & Jewellery Limited. Company c..

  • Insurance- Introduction

    Risk and uncertainty are associated with life in some of the other ways. These risks and uncertainties are increasing daily because of the increment in the speed of life. For example, i..

  • Rail Vikas Nigam Ltd. IPO

      Offer Details Price band Rs 17-19 Per Equity Share Offer Open Date Mar 29, 2019 Offer Close Date Apr 03, 2019 Lot Size..

  • Tech Mahindra Buyback

    The Board of Directors of Tech Mahindra Ltd. approved a share buyback for its investors on Feb 21, 2019. The details of the buyback include: Ex-Date: March 5th, 2019 Record Date: Marc..

  • BHEL Buyback

    The Board of Directors of BHEL approved a share buyback for its investors on Oct 25, 2018. The details of the buyback include:  Record Date: November 6th, 2018 Buyback price: Rs...