As part of the government’s divestment process, MSTC Limited has filed draft prospectus with SEBI. The company operates under the Ministry of Steel and specializes in e-commerce and trading activities. In the draft prospectus, the company said the government will dilute its equity stake through an Offer For Sale (OFS) of 17,600,000 shares, representing 25% of total paid-up equity. Since there is no sale of fresh shares, the company will not get any funds from IPO proceeds, said MSTC IPO prospectus.
The company is a major player in trading of bulk raw material and also undertakes e-auction/e-sale, e-procurement services for the government of India. MSTC also develops customized software and solutions. Nevertheless, the core business of the company is e-auction under which, it works with different government agencies and ministries.
Through the President of India, the government directly owns 89.85% equity in the company.
After launching the MSTC IPO, the shares will be listed on BSE and NSE. The IPO will be managed solely by Equirus Capital while Alankit Assignments Limited is the registrar to the offer.
The draft prospectus comes after almost one and half years following the government’s decision to divest stake in MSTC.
MSTC IPO prospectus: Dependence on government to reduce
Currently, the company gets nearly 85% of its revenues from trading and e-commerce activities for various government departments. However, it expects the situation to change once the government announces new e-commerce policy which will likely result in more business from private sector clients. Included among its other plans is also a move into B2C e-commerce space by creating a platform for engineering and construction goods for industrial and retail buyers.
Despite its dominant position in the niche, the company has struggled to register stable top line. In FY2017, MSTC witnessed a sharp decline of 43% in revenues to INR1,876.2 crore before jumping 49% in the subsequent year to INR2,793.2 crore. This had an understandable impact on profitability as the company posted losses in two out of the last three years.