MOIL IPO opens: Why are experts, brokerages bullish?

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MOIL IPO opens: Why are experts, brokerages bullish?

The initial public offering (IPO) of MOIL (formerly Manganese Ore India) has opened for subscription today. MOIL aims to raise Rs 1260 crore via offering of 336 lakh equity shares at higher end of price band of Rs 340-375.

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The initial public offering (IPO) of MOIL (formerly Manganese Ore India) has opened for subscription today. MOIL aims to raise Rs 1260 crore via offering of 336 lakh equity shares at higher end of price band of Rs 340-375.

It is an offer for sale for cash by The President of India, acting through the Ministry of Steel, Government of India, Government of Maharashtra and Madhya Pradesh. The issue will close for qualified institutional bidders on November 30 and for other investors on December 1.

Experts as well as brokerage houses are bullish on MOIL and expect fabulous listing as well.

Investment Advisor, SP Tulsian gives a thumps-up to the issue and congratulates the government on adopting such attractive pricing. "Investors are advised to go for the issue at the upper end of Rs 375," he says.

Manish Bhatt of Prabhudas Lilladher also advises the same.

"The issue is likely to get an overwhelming response, and is expected to get subscription of over 20 times under retail category, about 180 times under HNI and over 50 times in QIB categories. Going by the current grey market premium, listing is likely to be above Rs 600, resulting in a gain of about Rs 6,000 for a retail application. Retail investors are advised to apply at Rs 375 per share and go for as large as they can and they need to pay Rs 375 on application, though allotment shall be made after 5% discount," Tulsian explains.

Bhavin Shah, CEO of Equirus Securities elaborates, "MOIL is obviously the India's largest manganese ore producer and the quality of their mines are also very high and there is also growth in the business. They continue to find new reserves and we think that basically the stock should trade at some sort of premium to the fair value of its reserves and based on that we put a value around Rs 470. So even at the high end of that IPO pricing range, there is decent upside if somebody wants to hold the stock for a year or so and that is why we recommend subscribing to the IPO."

Brokerage houses like Emkay Global Financial Services, Nirmal Bang, IIFL, Mehta Equities and Fairwealth Securities recommends subscribing the issue.

Emkay Global

MOIL is the largest manganese ore producer in India, contributing 50% of the total domestic production. Globally it ranks fifth among all the manganese producers. The company is among the lowest cost manganese ore producers with an EBITDA margin of 70% during H1FY11. It has 22 mt of good quality manganese ore reserves. MOIL is a debt free company with net cash of Rs 105 per share during H1FY11. The company has a planned capex of Rs 7680 million to ramp up its capacity to 1.5 mtpa by FY16. At the upper band of Rs 375, the stock looks attractively valued with potential upside of 40% on 6x FY12E EV/ EBITDA basis - recommend subscribe.