Marshall Machines IPO

 

Marshall Machines Limited Background

Marshall Machines Limited is engaged in developing, manufacturing and marketing of Machine Tool Equipment. It was one of the first Indian CNC Machine manufacturers. Now, Marshall Machines IPO is getting ready to be launched in the next few days.

Talking quickly about the company, Mr Gautam Sarup founded and incorporated it on May 23, 1994, in the name and style of “Marshall Industries”. Marshall has won several national awards for its product and technology and has come to be known as an innovative machine tool manufacturer in India and pioneer of “Intelligent Automation” and has become a domestic leader in reliable automated turning solutions.

Their one of the biggest innovations is the award-winning patent-pending technology – IoTQ which stands for the Internet of Things for Quality. It is the most powerful technology in the field of CNC Turning and acts like a performance multiplier for each IoTQ enabled machine.

Marshall Machines Limited’s customers include GNA, Usha, Hero Honda, Havells, Rockman, Amtek Auto, etc.

Marshall Machines Limited Management

There are currently 6 Directors on the Board of Marshall Machines Limited. Mr Gaurav Sarup is the Managing Director. Mr Prashant Sarup and Mr Siddhant Sarup are the Whole Time Directors. Mrs Archana Sarup is the Non-Executive Director. Mr Harish Pal Kumar is Non-Executive & Independent Director. Mr Satvinder Singh is the Additional Non-Executive & Independent Director.

Gaurav Sarup, who is the Promoter and Managing Director, holds a degree in Production Engineering from Punjab University. He has an experience of more than 30  years in designing innovative machine tools. Currently, he is looking after production, sales & marketing, Research & Development, new business lines and overall business development of Marshall Machines Limited.

Prashant Sarup, who is the Promoter and Whole Time Director is a qualified engineer and has an experience of more than 25 years in designing and electronic integration. Currently, he is looking after finance, CNC-Robot Interfacing, Product Development and purchases of Marshall Machines Limited.

Marshall Machines IPO Data Points

The Marshall Machines IPO will open on August 28, 2018 and close for subscription on August 30, 2018.

Marshall Machines Limited is launching a fixed price issue IPO of 38.7 lakh equity shares of face value of ₹10 per share. Out of these 38.7 lakh shares, 1.98 lakh shares or 5.12% of the total issue size will be reserved for subscription by the market maker and the rest of the 36.72 lakh shares or 94.88% of the total issue size will be open for subscription by investors.

50% of the 36.72 lakh equity shares, i.e. 18.36 lakh equity shares can be allotted to retail individual investors and the rest of the 50% shares can be allotted to other investors. The market lot size will be of 3000 shares.

The fixed issue price per equity share is ₹42, thus, making it a ₹16.25 crores offer. The Fixed issue price is 4.20 times the face value. The shares will be listed on the National Stock Exchange of India Limited.

Marshall Machines Limited Financial Performance

The financial performance of Marshall Machines has been decent over the last years.

There has been a gradual rise in total revenues and total assets over the last few years. However, it is interesting to note that the percentage growth in profit after tax for the year ended March 31 2018, from the previous period has been significantly higher than the previous figures.

 

Similarly, the earnings per share have also increased significantly in the last financial year as compared to the previous one. The net worth of Marshall Machines grew to  ₹1,153.94 lakh for the year ended March 31 2018, from ₹872.25 lakh for the year ended March 31, 2017.

The percentage gain of Return on Net Worth for the period ended March 31 2018, was 43.36% as opposed to 12.67% in the previous period. The long-term debt/ equity ratio is 0.71 and the total debt/ equity ratio is 1.62.

Marshall Machines IPO Objectives

The main objectives of Marshall Machines IPO are as follows:

• For Capacity Augmentation
• For up gradation of existing research and development and their technology IOTQ Center (Internet of Things for Quality)
• For the establishment of new IOTQ Centers
• For Working Capital Requirements
• For General Corporate Purpose
• For meeting Marshall Machines IPO expenses

Conclusively, most of the raised funds are going to be utilized in the growth of the business and that happens very less as most of the times, initial investors and/or promoters look to exit a portion of their stake in the business through these findings.

This definitely goes in the favour of Marshall Machines.

Marshall Machines IPO Events

Marshall Machines Limited filed the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) on July 23 2018, for the fixed price issue.

The offer will open on August 28, 2018 and will remain open for subscription till August 30, 2018.

Marshall Machines IPO Recommendation

Before deciding whether to invest in Marshall Machines IPO, let us examine some strengths of the business and risks related to it.

One of their biggest strengths is their intellectual property and proprietary technology, their patented Double & Four spindle CNC Turning Centers give them a tremendous edge over their competitors. They have this award-winning patent-pending technology – IoTQ –i.e. Internet of Things for Quality, which is considered to be the most powerful technology in the field of CNC Turning.

Due to the unique business model, the company’s order booking position is quite strong currently. Their focus on Research and Development also makes them quite strong in comparison to their competitors. They have invested in two R&D divisions located at their two factories in Ludhiana.

They have a strong, experienced and efficient management team which is complemented by a professional team of functional experts. They have got excellent feedback from some of the largest Indian auto component manufacturers for their new products due to which they are sure about a significant increase in revenues and EBITDA margin.

Besides all these strengths, their strategy to increase their presence globally and increase their profitability makes them a promising company to invest in.

However, like any other business, there are risks involved with Marshall Machines Limited like the entry of global players in this sector and technology disruptions.

Also, any changes in technology may make their current technology obsolete or if they are unable to protect or use their intellectual property rights, it could be a major setback for the business.

Then, there is a risk associated with expansion in new markets like U.S. One other risk is of high amount cash in hand, which is not covered under any insurance policy against theft or embezzlement.

Also, some of their weaknesses are long manufacturing cycles, dependence on imports for key components and huge inventory maintenance including for critical components.

Coming to the financial part, there has been a consistent growth in revenues and profit after tax.

An interesting thing to notice is that the rate of growth of profit after tax has shown a sudden tremendous increase in the financial year ended March 31 2018, as compared to the previous period.

The Profit After Tax for the financial year ended March 31 2016, was ₹41.53 lakh, which increased to ₹110.49 lakh in the financial year ended March 31, 2017. This number further increased to ₹500.3 lakh in the financial year ended March 31, 2018.

This could be a cause for concern. Also, it still needs to be seen whether Marshall Machines are able to sustain this high growth in the coming years or not. One other thing is that Marshall Machines Limited had negative cash flows from operating activities, investing activities as well as financing activities in some of the previous years.

Cash flow of a company is a key indicator to show the extent of cash generated from operations to meet capital expenditure and expenses related to payment of dividends, repayment of loans and making new investments without taking further loans. If enough cash flow is not generated in the future, it may adversely affect the business of the company.

Overall, by looking at their competitive edge in terms of quality as well as technology and expansion plans in different geographies, it seems that the business has great growth potential.

Also, the management team seems quite experienced and qualified. Investors need to remain cautious but may subscribe to the IPO for a long-term for better gains.

In case you are looking to apply to this IPO and invest – let us assist you in getting started:

 

Marshall Machines IPO Advisors Information

Sarthi Capital Advisors Private Limited is acting as lead manager to the issue. Bigshare Services Private Limited is acting as registrar to the issue. Ankur Ghai is acting as legal advisor to the issue.