Milltec Machinery or Milltec is a diversified agro-processing equipment manufacturer, with its sales and distribution network spanning across the country and overseas. The company’s portfolio includes equipment to facilitate processing of rice, pulses, wheat, seeds and maize. It has claimed that it has an estimated market share of 10 per cent in the total rice processing equipment industry.
Object of the offer
The object of the offer for sale is to achieve benefits of equity shares listing on the stock exchanges, and to facilitate sale of equity shares by shareholders. It also provides liquidity to the existing shareholders.
Policy and Industry Growth
The domestic milled rice industry, of which Milltec is a part, is mostly driven by domestic consumption, which accounts for over 90 per cent of the revenue, while exports account for the rest. The company’s revenue is expected to grow at a healthy pace of 7-8 per cent compound annual growth rate over the next three years, driven by a steady increase in consumption and a gradual shift from unbranded to branded rice. On the other hand, exports are expected to grow at a fast pace of 10-11 per cent in terms of value, because of rising demand from the Middle East, the US, the UK and new markets, such as China, as mentioned in the Draft Red Herring Prospectus (DRHP). With consumers increasingly preferring higher-quality rice, especially in the urban areas, the changing consumption pattern will be driving growth of the branded-rice segment, fetching higher realisation for the mills.
The company is backed by Renuka Ramnath who founded Multiples Alternate Asset Management, a private equity firm, (better known as Multiples Private Equity or Multiples PE in the market). In 2013, Multiples PE picked up 49 per cent stakes in the company as it bought out two other promoters, VGN Prakash and Raman Iyengar.
Milltec plans to dilute 37.50 per cent stake via the offer for sale route. Multiples PE and its promoters are offering their partial holding in the company to public shareholders. It will sell 22.5 per cent, while a group of promoters will divest 15 per cent holding into the company. According to media reports and market sources, the company plans to raise close to `500 crore through this offer.
According to the DRHP of the company, Milltec had a pre-IPO placement where Multiples PE sold 7.5 per cent to ace investor Ashish Kacholia and Bengal Finance & Investment, each picking up 3.75 per cent stakes. This pre-IPO placement has reduced Multiples PE shareholding in the company to 41.5 per cent.
During the last five financial year (FY), beginning from 2013, the company has manufactured and sold over 21,980 grain processing equipment. It has established long-term relationship with several customers and leverages its relationships to cross-sell equipment to the existing customer and to develop relationships with new customers.
Moreover, the company claimed, it continues to grow its global footprint by exporting to African countries, Germany, Indonesia, Iran, Myanmar, Netherlands, the Philippines and the UK. Apart from these exports, the company also installs fully-equipped plants in Bangladesh, Pakistan, Nepal, Sri Lanka and Thailand, it said in the DRHP.
For FY2018, FY2017 and FY2016, Milltec’s revenue from the sales of boilers, parboiling and drying equipment and colour sorting equipment was Rs62.291 crore, Rs40.16 crore, and Rs34.40 crore, respectively, contributing to 23.41 per cent, 18.18 per cent and 18.65 per cent, of the revenues for each of these periods, respectively. (For full details see table of past financial performance).
By the end of FY18, the company offered a range of 200 types of grain processing equipment to cater to the processing of rice, pulses, seeds, maize and wheat. This apart, the company also offers ancillary products such as yield management solutions.
Milltec which aims to continue to be one of the most preferred brands in the milling segment in India and grow its existing market share, propose to expand its operations inorganically through strategic acquisitions of entities primarily engaged in businesses similar to that of companies.