See drastic reduction in NMDC ahead of FPO: Tulsian

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » ALSO READ See previous views by SP Tulsian See what other Experts & Brokerages are saying about NMDC See messages about NMDC NMDC BSE | NSE 09/02/12 Are Mutual Funds betting on NMDC?

Investment Advisor, SP Tulsian sees drastic reduction in share price of NMDC ahead of its follow-on public offering (FPO).

Tulsian told CNBC-TV18, "I don't think in case of SAIL , you have fear from hereon (considering the disappointment that most retail investors are faced with NTPC) because if you recall it went up to Rs 245 and now ruling close to Rs 205 or so. So it looks to have corrected to its realistic value because personally I am positive on the metal sectors going ahead even for ferrous and non-ferrous."

He also added, "But yes, your point is right in case of NMDC and MMTC - honestly if you see the valuation of MMTC, it is purely moving on a float of less than 3 bps that is 1/30th of 1% with just 15,000 shares in the market out of 5 crore shares. So how can you have efficient price discovery if that share on a fundamental basis is not even worth Rs 5,000? But it is ruling at maybe Rs 33,000-34,000."

"Same thing is here at NMDC because if you compare the stock, it is at a P/E multiple of about 40-45. You have comparable peers available in form of Sesa Goa which is ruling at a P/E multiple of maybe about 11-12.30. So even there correction has to take place but yes because FPO for NMDC has been lined up going ahead, I see the drastic reduction coming in that," he has said.

He also added, "Again the wisdom of investment banker and government will prevail to fix up the floor price. If they take the secondary market price as the criteria, it is going to be a disaster or maybe the issue is going to get bombed off. I don't think that even institutional investors will be willing to come forward and subscribe at Rs 450. The floor price has to be based on the efficient price calculation which government ultimately will take a call."