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13 October 2023

Master Components IPO: A Look into the World of Plastic Engineering

Introduction:

Master Components Limited, a company established in 1999, ventured into the IPO market to raise capital for its expansion plans. This company specializes in the manufacturing of plastic engineering components and sub-assemblies.

IPO Highlights:

The Master Components IPO, with a total value of Rs 15.43 crores, included a fresh issue of 7 lakh shares worth Rs 9.80 crores and an offer for sale of 4.02 lakh shares valued at Rs 5.63 crores. The IPO bidding phase took place from September 18, 2023, to September 21, 2023. The allotment results were finalized on September 26, 2023, with the shares being listed on NSE SME on September 29, 2023. Priced at ₹140 per share, the IPO had a minimum lot size of 1000 shares, requiring a minimum investment of ₹140,000 for retail investors.

Key Market Players:

Aryaman Financial Services Limited served as the book running lead manager of the Master Components IPO, while Bigshare Services Pvt Ltd acted as the registrar for the issue. Aryaman Capital Markets was the market maker for the IPO.

Stock Performance:

As of October 6, 2023, Master Components Limited's stock was trading at ₹140.50, with a minor decrease of 0.07%. The stock opened at ₹141.00, reached a high of ₹142.50, and had a low of ₹140.15. The previous closing price was ₹140.60, with a total traded value of 53,000 shares.

Ownership Structure:

Before the IPO, the shareholding was 100%, which later reduced to 72.41% after the IPO, signifying changes in the company's equity structure.

Financial Insights:

Master Components showed a strong financial performance. As of March 31, 2023, the company's assets grew to ₹1,659.17 lakhs, largely due to substantial revenue of ₹2,090.03 lakhs, a significant increase compared to the previous years. The company reported a profit after tax of ₹170.54 lakhs, reflecting substantial growth from previous years. Net worth increased to ₹1,165.31 lakhs, with reserves and surplus standing at ₹835.31 lakhs. Total borrowing amounted to ₹93.96 lakhs.

Market Indicators:

Key performance indicators included a Market Capitalization of ₹56 crores, a Price-to-Earnings (P/E) ratio of 27.09, and a Return on Equity (ROE) of 59.68%.

Objectives of the Issue:

The net proceeds from the IPO were intended for several purposes, including:

1. Meeting working capital requirements.
2. Funding general corporate purposes.

Expert Opinion:

Pointed out that the company operates in a highly competitive and fragmented segment. Although it recorded growth in its top line, the extraordinary earnings for FY23 raised concerns about the sustainability of margins. Based on FY23's performance, the issue appeared to be aggressively priced. The relatively small equity capital post IPO suggested a longer gestation period for migration to the mainboard. He advised potential investors to exercise caution when considering this expensive investment.

Subscription Status:

The Master Components IPO garnered significant interest from investors, with an overall subscription rate of 8.20 times as of September 21, 2023. Retail investors displayed remarkable enthusiasm, with a subscription rate of 10.11 times.

Conclusion:

Master Components Limited's IPO marks its entry into the public market, highlighting its potential in the plastic engineering industry. Potential investors should conduct thorough research into the company's financial stability, growth prospects, and competitive landscape before making investment decisions. As with any investment, prudent risk management and diversification are essential strategies when considering IPO opportunities in the world of plastic engineering.

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