ICRA said that MTAR has recently concluded its initial public offering of Rs 596.41 crore, which comprised Rs 123.51 crore of fresh issue and the balance offer for sale (OFS). The company has also undertaken a pre-IPO placement for the sum aggregating to Rs 100 crore. The rating upgrade considers the above equity infusion, along with the company's repayment of its outstanding working capital borrowings, which will improve the capital structure and debt coverage metrics.

The rating action also factors in the robust revenue growth in 9MFY2021, backed by healthy improvement in the order book and timely execution of orders. The ratings also consider the comfortable financial profile, with healthy operating profit margins (approximately 30% for 9MFY2021), strong net worth base and healthy debt protection metrics post IPO.

The ratings, however, is constrained by the moderate scale of operations, though the scale improved significantly over the past few years. The ratings are further constrained by the high customer concentration as the company derives a major share of its revenues from one client ie., Bloom Energy Corporation.

Further, the ratings consider the company's working capital-intensive operations owing to the long production and receivables cycle inherent to the industry. The ratings also consider the vulnerability of its margins to fluctuations in forex rates to the extent of unhedged position and the margins vary depending on the segment and customer mix.

The positive outlook on the [ICRA]A-/[ICRA]A2+ ratings reflects ICRA's expectations that the company's operational and financial profile will continue to improve backed by its expanding order book position and scale, and it will maintain healthy profit margins as it is the key supplier for many of the products manufactured by it.

MTAR is a leading precision engineering solutions company engaged in the manufacture of mission critical precision components with close tolerances (5-10 microns), and in critical assemblies, to serve projects of high national importance, through their precision machining, assembly, testing, quality control, and specialized fabrication competencies, some of which have been indigenously developed and manufactured. The company primarily serve customers in the nuclear, space & defence, and clean energy sectors.

The MTAR scrip gained 2.08% to end at Rs 941.30 on Tuesday.

The stock entered the bourses on 15 March 2021. It was listed at Rs 1063.90, a premium of 85.03% to the initial public offer (IPO) price of Rs 575 apiece. On that day it settled at Rs 1082.25 on the BSE, a premium of 88.22% as compared to the IPO price.

The IPO of MTAR Technologies was subscribed 200.79 times. The issue opened for bidding on 3 March 2021, and closed on 5 March 2021. The price band for the IPO was set at Rs 574-575 per share.