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Mining For Profits - MOIL India

| 11/22/2010 5:28 PM Monday

The Government of India seems to be cruising in terms of its aim to raise Rs 40,000 crore through divestment this fiscal. While Coal India’s initial public offering (IPO) has got successfully listed, even the follow-on public offer for Power Grid Corporation of India got oversubscribed significantly. Next in line is a Mini Ratna company, Manganese Ore India (MOIL India). The recent IPO of Coal India was missed by many and given the kind of fantastic listing it has provided those who did not invest must be cursing themselves and are looking at a chance to offset the notional losses by investing in other PSU offerings. It is true that MOIL is India’s largest manganese ore producer by volume and investors are eagerly waiting for its IPO. But after the listing of Coal India a few factors have changed and the market has witnessed some amount of uncertainty. So the moot question is whether to invest in the MOIL IPO or to avoid it? Going ahead we have discussed the same in detail. But first let’s get updated about the IPO.

As mentioned earlier, the main objective of the offer is to carry out the divestment of 3.36 crore equity shares.That means the whole issue is offer for sale and company will not receive any proceeds. As regards the pricing of the issue, no announcement was made till the time this issue of DSIJ was sent for printing.  The management has suggested that it plans to raise anywhere between Rs 1,000-1,200 crore. The simple calculations suggest that the issue being priced in between Rs 300-350 per share. But as everyone knows, the pricing of the issue is important these days and also decides its fate. Even the retail investors nowadays try to skip the issues, unless and until there is something on the table for the investors. So what would be the right price for the issue? That is something we have analysed here. However, let us first understand the business of the company.

The Business
MOIL is the largest producer of manganese ore in India. “We are also the fifth-largest in the world in terms of volume. We cater to 50 per cent of the demand in the Indian markets,” informs K J Singh, CMD, MOIL India. As regards MOIL’s operations, the company owns ten mines, six of which are located in Maharashtra and four in Madhya Pradesh. Out of these seven are underground and three are open cast mines.

 

Find More Articles on: DSIJ Magazine, New Issue Analysis, IPO, IPO Analysis, Product, Large Cap, PSU, Mid Cap

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