MOIL IPO- Subscribe

Incorporated in 1962, Manganese Ore India Limited (MOIL) is a Government of India owned company engaged in mining operations of manganese. The company is a ‘Mini-ratna’ public sector enterprise and also the largest manganese ore producer in the country and fifth largest in the world.

The company operates 10 mines – six in Maharashtra and four in Madhya Pradesh. Its reserves stand at 69 million tones. The production of manganese ore by the company accounts to ~50% of the requirements of the country.

MOIL has also diversified into renewable energy and is the first PSU in India to set up wind farm of 20 MW capacities in the Nagda / Ratedi Hills in Madhya Pradesh.

Objects of the Issue:

• MOIL has planned a capex expansion of RS.840mn for FY11 & Rs.1.08bn for FY12, towards development of its existing mines.
• It has proposed to produce 51,000tpa of Ferro manganese through a JV at Chhatisgarh.
• It has signed an agreement with Rashtriya Ispat Nigam Ltd. to produce 112,500tpa of Silico manganese at Andhra Pradesh.
• It is seeking overseas acquisitions in South Africa, Turkey, Gaban and Congo to meet the growing demand of manganese ore by country’s steel industry.

Company Credentials

• MOIL accounts for ~50% of total production in the country and the demand for manganese is expected to remain robust.
• Out of the company’s current reserves, 55% have an average content of 40% & above, 27.5% have an average content of 36-40%. It does not have reserves with content below 30%.
• Backed by lower costs, MOIL enjoys best margins in the business.
• All the mines of the company are strategically located.

Financials

·         MOIL with a healthy balance sheet & strong cash flows, is a debt free company.

·         Year on year, the company has been reporting healthy revenue & PAT CAGR figures. Over the last four years the CAGR on revenue and PAT has been 31% and 42% respectively.

·         It has strong OPM and PAT margins, 70.3% and 52.1% respectively.

Outlook

                      

Keeping in view the robust demand outlook of manganese ore and MOIL’s key characteristics, the IPO is an opportunity not to be missed. At the upper level of price band Rs.340-Rs.375, the stock would be trading at 6xFY12E EV/EBITDA basis. The stock is attractively valued with a significant upside potential. The IPO would be value accretive for one’s portfolio. We recommend the long term investors to subscribe to the issue.

 

Snapshot

Issue Open: 26 Nov’10 – 1 Dec’10

Issue Type: 100% Book Building

Issue Size: Rs. 1238 Crore

Face Value: Rs. 10 Per Equity Share

Issue Price: Rs.340-Rs.375 per share

Lot Size: 17 shares

Exchange: NSE/BSE