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Saturday, November 27, 2010

MOIL IPO - Should you subscribe?

MOIL IPO price band has been fixed up at Rs. 340-375. IPO has received good response on first day of it's opening. 0.76% has been subscription on day one despite market conditions being bad for past few days. Can MOIL IPO fetch you good returns in such conditions? Should you invest in IPO of MOIL? Let's see.

MOIL is largest manganese ore producer in India. It contributes almost 50% of the total domestic production. MOIL stands at fifth rank globally. Manganese ore business is growing day by day. MOIL has good quality manganese mine reserves with them and they are behind finding new mines continuously. Estimated good quality manganese ore for MOIL is approx at 22 MT.

Since MOIL has got good quality mines and huge manganese reserves, company's stock price, when listed in stock markets, would command the premium for these reserves on top of stock price based on company's financials.

MOIL is operating at EBITDA margin of 70% during H1FY11. This makes it among the lowest cost manganese ore producers. Company does not carry any debt on it's balance sheet. MOIL has Rs. 105 cash reserves per share as in H1 FY11.

The upper band of IPO is at Rs. 375. Even at the high end of this IPO price band, there is decent upside if one holds stock for 1 - 2 years. I would recommend to invest in IPO and look for decent listing gains and some good returns if one wants to hold for some time.

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