Business India ×
  Magazine:
Corporate Report

Published on: Feb. 22, 2021, 10:36 a.m.
The sky is not the limit for MTAR
  • MTAR: supplying critical components to nuclear, space and defence sectors

By Lancelot Joseph. Executive Editor, Business India

When the going gets tough, the tough get going, wrote American football coach John Thomas in 1953. This axiom today applies to the Hyderabad-based MTAR Technologies too, in more than one way. Old-timers at MTAR recall India’s former President and ‘Missile Man’ Abdul Kalam telling his team during his DRDO days: “If nothing is getting done, go to that Reddy company at Hyderabad.”

In fact, the Reddy duo – Ravindra and Satyanarayana – set up MTAR, to meet a challenge thrown at them by the government, way back in 1970, to make a critical cooling channel for a nuclear reactor. As global suppliers began tightening their screws on India’s nuclear power ambitions, the government asked HMT to work on the cooling channel. The late Ravindra’s son P. Srinivas Reddy, MD, MTAR, recalls that HMT expressed its inability to do this and the Reddy duo, who were working there, quit and told DAE they would take up the channel challenge.

DAE gave them the opportunity and that’s how they set up Machine Tools Aids and Reconditioning in July 1970, as a partnership firm, which later became MTAR. “The late chairman was passionate about taking up challenges; money was secondary,” says Srinivas. Ravindra, credited with developing systems for the nation’s defence and nuclear programmes, passed away in 2016 at the age of 77. “From a small machine shop in the Bala Nagar industrial area of Hyderabad, MTAR grew under his leadership to manufacture rocket engines that powered Mangalyaan (Indian mission to Mars), The Hindu wrote.

 Product portfolio

Over the years, the private company fabricated engines for the PSLV and GSLV launchers, which have put numerous satellites into space. As per a CRISIL report, the engine for the PSLV-C25, which launched the Mars Orbiter Mission Spacecraft, as part of the Mangalyaan mission, was supplied to ISRO by MTAR.

MTAR now develops and manufactures a wide range of mission critical precision components, with close tolerances such as five to 10 microns, through its precision machining, assembly and specialised fabrication facilities, for application in the nuclear, space and defence and clean energy sectors in India and abroad. Technically speaking, a micron is one millionth of a metre and the company uses high precision quality inspection equipment such as 3D co-ordinate measuring machines (CMM), laser measuring, optical alignment instruments, non-contact measuring and other such non-destructive testing equipment, to ensure ideal quality. “MTAR enjoys an unblemished record of quality for its product range,” says Srinivas, who was just five years old, when his father quit HMT to set up MTAR. The company manufactures complex mission critical components and assemblies, such as fuel machining heads, drive mechanisms, bridge & column, and coolant channel assemblies, among others, for nuclear reactors. It also provides customised ball screws and water lubricated bearings that are import substitutes and used in various assemblies’ complex products.

MTAR’s major product portfolio includes 14 kinds of products in the nuclear sector, six kinds of products in the space and defence sectors and three kinds of products in the clean energy sector. “We strive to understand our customers’ specific business needs and provide products to meet their requirements. We believe that our ability to provide quality products as per customer specification and our consistent customer servicing standards have enabled us to increase our customers’ dependence on us,” he explains. For instance, within the nuclear sector, MTAR’s longstanding relationship of over 16 years with NPCIL speaks for itself.

Within the space sector, the company has established its relationship with ISRO, by supplying a wide variety of mission critical components and critical assemblies for its various missions, for over three decades. Specifically, MTAR makes liquid propulsion engines, cryogenic engines – turbo pumps, booster pumps, gas generators and injector heads for such engines – and electro-pneumatic modules to serve space launch vehicles.

“Our operations are supplemented by R&D, a critical part of our business capability that is undertaken primarily for our manufacturing processes,” says Srinivas, who has a master’s degree from Louisiana Tech University. “Our R&D capabilities have enabled us to keep abreast of technological developments in the precision manufacturing industry, thereby allowing us to have a focussed approach on consistently upgrading the technology and the processes used in the manufacture of our products.”

The list of records set by MTAR seems endless. CRISIL says the engine for the PSLV-C49, which recently injected the EOS-01, an earth observation satellite, into space was supplied to ISRO by it. It was also integral to the GSLV Mark III engine for the Chandrayaan II mission. V Narayana, director, LPSC/ISRO, compliments MTAR on the successful launch of the GSLV Mk-III/ M1 Chandrayaan-2 Mission. “We also acknowledge the excellent contribution of your team in the successful mission,” he informed Srinivas. “We expect co-operation and support from your side in future missions also.”

 Clean energy foray

While catering to organisations such as the DRDO, MTAR not only undertook complex assemblies like the base shroud assembly for Agni missiles and the assembly of SITVC valves and HFTC valves, but also manufactured actuators for light combat aircraft (LCAs). It also perfected the skill of making fuselage and landing gears, mainly for defence. “We also supplied critical defence products such as aluminium weldments and other machined components to our international customers, including an Israeli defence technology company,” explains Devesh Dhar Dwivedi, COO, MTAR.

In a later development, MTAR began catering to customers in the clean energy sector through their supply of power units, specifically, hot boxes to Bloom Energy. The company also invested in the development of roller screws, an import substitute, and is involved in developing the associated technology. MTAR will be the first manufacturer of roller screws in India and the product will be used for a wide variety of applications in the nuclear, space and defence sectors, says CRISIL.

To strengthen the domestic nuclear supply chain in line with the government’s ‘Atmanirbhar Bharat’ initiative, the government has devised a policy to construct a fleet of reactors with a single timeframe. This is expected to increase opportunities for domestic suppliers such as L&T, Godrej, MTAR, etc. With rising contract volumes, new entrants will plan to make in-roads into the industry. But entry barriers are high, especially in technology, reliability, and manufacturing capability.

“With the successful execution of NPCIL mandates in the past, we believe that we are well positioned to not only capitalise on this opportunity, especially in view of the fact that we have manufacturing facilities to undertake projects for four reactors at any given point of time, but also take advantage of future orders placed by the NPCIL and other Indian public sector undertakings,” says Srinivas Reddy.

The flipside is that nuclear power comes with a higher cost of energy than solar or wind. And, it also comes with health and safety concerns. Several nuclear projects have faced backlashes and protests from local communities, resulting in construction delay in Maharashtra and Tamil Nadu. But MTAR says its risk mitigation strategy is to focus on the clean energy sector.

“The demand for clean energy is going to rise significantly,” says Dwivedi. MTAR has already started manufacturing electrolysers – that break water into hydrogen and oxygen – to produce methane-free hydrogen, which can be used in multiple sectors to generate power. “Yes,” he quips: “MTAR emits oxygen, while making electrolysers.”

According to CRISIL, fuel cells, which use the chemical energy of hydrogen or another fuel to produce electricity, are one of the evolving distributed sources of electricity. Applications of fuel cell technology have increased over the past five years, as electricity wattage installation logged 30-40 per cent CAGR to reach 1,130 MW in 2019 from 300 MW in 2015. Increasing public-private partnerships will also result in faster adoption of hydrogen-based applications.

MTAR is deliberating on enquiries received and plans a new facility for the manufacture of high precision large and medium sized gears that would cater to customers in defence, aerospace and clean energy, the MD says. PE investor Fabmohur & Solidus LLP was impressed with MTAR’s “track record of nation building through supplies of critical components to nuclear, space and defence sectors, strong competitive positioning and an opportunity to install a professional management and transform the business,” says the firm’s director Mathew Cyriac who is also a nominee director on MTAR’s board, and was with Blackstone earlier. Fabmohur & Solidus LLP acquired around 33 per cent stake and invested R 36 crore at an average cost of R38.44 per share. MTAR Tech has done a pre-IPO round at R540 per share. Based on that, the current holding of Fabmohur & Solidus is valued at over R475 crore. The PE firm is divesting about 57.8 lakh shares out of total holding of about 88.6 lakh shares and will continue to own 10 per cent in the company post IPO and Cyriac will continue to serve on the board of MTAR. 

State-of-the-art facilities 

MTAR is now going public, having filed its draft offer document with the market regulator SEBI, targeting to raise Rs600-650 crore. The float is for 4,000,000 shares and an offer for sale of up to 8,224,270 shares from the promoter and investors selling shareholders, aggregating to 12,224,270 equity shares of face value of Rs10 each. The price band will be decided later in consultation with book running lead managers – JM Financial and IIFL Securities.

The company enjoys an order book position of Rs356 crore. Between 2018 and 2020, its total income and EBIDTA have grown at a CAGR of 16.56 per cent and 37.80 per cent, respectively. For Q2 2020-21, the revenue from domestic customers accounted for 47.29 per cent and exports stood at 52.71 per cent of its total revenues. It is in the process of establishing a sheet metal facility in Adibatla in Hyderabad and also plans to construct an additional shed for specialised fabrication work, the offer document says.

MTAR runs seven state-of-the-art manufacturing facilities, including an EoU (export-oriented unit) – all situated in Hyderabad, a defence R&D hub. “This not only provides MTAR access to critical R&D and high-volume projects, but also allows for ease of co-ordination, specifically in terms of our collaborative R&D efforts, as well as for subsequent close monitoring of manufacture and quality control processes,” says Srinivas. MTAR has 896 permanent employees, including 147 engineers and the average employee tenure with the company is about 15 years, with a low attrition rate of about six per cent in the last three years, which further demonstrates the level of engagement of its workforce. “Our teams worked overtime to make up for the man days’ loss during the lockdown and all are committed to take the company to the next level,” says Srinivas.

CRISIL points out that India banned import of 101 defence-based items, which will allow a widespread manufacturing base, introduce global best practices, and aid job creation. At the same time, India’s defence spends have been rising continuously over the past five years. The intensifying tensions and conflicts with Pakistan and China are the key contributors to India’s rising military expenditure. The Indian defence sector is at an inflection point and several policies are being laid out by the government of India to promote the Indian manufacturing sector.

MTAR, on its part, is prepared to take advantage of the Atmanirbhar Bharat initiative. The Defence Acquisition Procedure 2020, mandating 50 per cent of indigenous content and the hike in FDI in the Indian defence sector to 74 per cent from 49 per cent under the automatic route, will also be beneficial to MTAR.

The global space market opportunity amounts to a massive $360 billion. Increased use of space launch vehicles for satellites and testing probe applications, introduction of space tourism and development of satellite internet system have propelled the growth globally. ISRO intends to commercialise the Indian space sector and offer its products and services to other countries. It has also announced the manufacture of a small satellite launch vehicle (SSLV) that will be able to lift satellites up to 500 kg in the lower earth orbit, thereby making the space launches of ISRO even more competitive for lower payloads. ISRO is also working on certain major missions such as Gaganyaan, Aditya I and Shukrayaan I, among others.

Analysts point out that these activities are expected to provide an exponential growth to Indian players operating in the space sector and that, accordingly, MTAR’s order book will grow significantly in the future, considering that MTAR has, along with its customers, been playing a key role in the co-development of quality products for key national programmes such as the Chandrayaan and Mangalyaan missions. “We are there in every satellite launch,” says Srinivas, exuding confidence that ISRO will soon bounce back to normalcy post Covid. He points out that India is the cheapest satellite launch pad for the world.

Global exposure 

The company, along with a nuclear research facility, is engaged in developing channel health assessment system CHAS and the detailed design, engineering, manufacturing and assembly is under process at one of its manufacturing facilities. “As a result of this, we believe it may be difficult to replace us, especially given the steep learning curve and our investment in advanced manufacturing facilities and precision requirements. Given our relationship with our international customers, we will be the one of the preferred suppliers in any potential defence offset transaction that such customers may be a part of,” Dwivedi explains.

MTAR has not spared global networking opportunities and participated in various seminars and international expos. “A certain portion of our business operations are focussed on exports to international customers. For instance, we are involved in the manufacture of power units, specifically hot boxes, and in the development and manufacture of hydrogen boxes and electrolysers, to serve Bloom Energy,” says Srinivas. “MTAR recently acquired a new international customer operating in the clean energy sector. We also supplied critical defence products such as aluminium weldments and other machined components to our international customers including an Israeli defence technology company,” he adds.

According to the CRISIL report, the government targets for clean energy, budgets allocations, and incentives are the strongest driver for fuel cell market development. Various governments are globally taking steps to establish hydrogen fuelling infrastructure and Europe, the US and Japan are regions with the strongest government support in the field of fuel cells. With growing concerns over climate change, hydrogen is emerging as a clean solution that can help curb carbon emissions globally and, while support for hydrogen is steadily increasing within the US, many other nations are also taking an active approach by implementing hydrogen-focussed strategies and investments.

Bloom Energy has signed an MoU with a central public sector undertaking, to deploy fuel cell technology in India by using natural gas as fuel. The CRISIL report states that Bloom Energy, which is one of the major players in the solid oxide fuel cell space, has installed the majority of the solid oxide fuel cell space installation in the US and is now targeting the South Korean market.

“These, either individually or combined, we believe, provide an opportunity for a significant revenue stream to our company. In addition, we intend to reach out to global OEMs who either currently have defence deals with India or have their business operations in India. We are also looking to enter into defence offset partnerships with certain global OEMs and have incorporated our subsidiary, Magnatar Aero Systems Private Limited, in this regard.

We have also, along with a global partner, bid for the first of a two-part tender, for design, development, preparation of design documents and analysis report, procurement of raw material, manufacture, fabrication, assembly, inspection, testing, qualification, quality surveillance, supply to site and supervision during installation of spent fuel storage racks, far away from reactor spent fuel storage facility at site, and have separately entered into a collaboration agreement with such a partner,” says the MTAR offer document submitted to SEBI.

With an ocean of opportunities, the sky does not seem to be the limit for MTAR as it looks to consolidate its strong base in space, nuclear and defence spheres which all have high entry barriers and few successful players.

Don't miss this

Cover Feature

Why September is crucial

The true picture of the economy has started to emerge. A lot now depends on consumer demand

Special Report

Markets on a new high

The markets, which have given a thumbs-up to the government’s policies, may hit the pause button for a few sessions

Focus

Island of distress

Lanka’s fragile liquidity situation has put it at high risk of debt distress

Corporate Report

JB Chemicals new formulations for growth

The company is all geared up to start its next growth phase

Our letter to you, once a week.
Register with The CSR Weekly for free!

E-MAGAZINE
Why September is crucial
Top Business Houses
Paytm The Indian Fintech Giant
FROM THIS ISSUE

Business & Industry

Corporate Report

Automobiles

Corporate Report

Education

Milestones

Social Responsibility

Healthcare

Goodyear India partners Americares India Foundation

Published on Feb. 2, 2021, 9:21 p.m.

The partnership will support COVID-19 healthcare facilities in Faridabad and Aurangabad

Environment

Tata Motors launches a 'Go Green' initiative

Published on Dec. 23, 2020, 10:34 a.m.

The company will plant a sapling for the sale of every new commercial vehicle

Women Empowerment

Tata Starbucks ties up with Educate Girls to empower women

Published on Dec. 2, 2020, 3:10 p.m.

The partnership aims to provide volunteering and educational support to those who have relocated to urban cities from villages

Environment

Indian Oil has a social initiative for a clean and green world

Published on Nov. 25, 2020, 2:53 a.m.

The public sector company is planting a tree for every retail customer visit during its TreeCheers campaign period

Climate Change

E-vehicles

Ola creates history

Published on Sept. 22, 2021, 3:38 p.m.

The company sells electric two-wheelers worth Rs1,100 crore in two days

Sustainability

Mastercard’s masterstroke for sustainability

Published on Sept. 22, 2021, 3:20 p.m.

Mastercard launches Sustainability Innovation Lab

Government and Policy

Kerry launches Indo-US Clean Energy Partnership

Published on Sept. 14, 2021, 8:31 p.m.

US senator introduces Bill to boost bilateral cooperation

Renewable Energy

Let a thousand Solar Parks bloom!

Published on Sept. 14, 2021, 11:08 a.m.

TN Energy Minister V Senthilbalaji says the state will have Solar Parks in every district

Stay ahead of the times.
Register with The Climate Change Weekly for free!