Manganese Ore India - MOIL IPO Review

Manganese Ore India Limited (MOIL) largest producer of manganese ore and a 'Mini Ratna' PSU, is coming out with an IPO of 33,600,000 Equity Shares of Rs.10 each in the price band of 345-375. MOIL accounts for approximately 50.0% of India's total production of manganese ore and the company hopes to maintain its leadership position in the manganese ore market.

MOIL operates seven underground mines and three opencast mines to produce more then 1m tonnes of manganese ore. The company is well positioned to capture the growth potential of the Indian steel industry, due to its track record and strategic location of the mines. The key risk is that the Manganese ore and alloy industry has historically derived demand from the steel industry and hence is directly exposed to the volatility and the cyclicality of the global steel industry.

Details of the issue:

Issue Open: Nov 26, 2010 - Dec 01, 2010.
Issue Size: 33,600,000 Equity Shares of Rs. 10.
Face Value: Rs. 10 Per Equity Share.
Issue Price: Rs.340-375 Per Equity Share.
Listing at BSE and NSE.

The EPS for the year FY10 stands at Rs.28 and at the higher band of Rs.375 the company would be trading at 14 P/E, which is well priced. There is no direct comparable listed peer with which the stock can be compared with other than NMDC which trades at at 25 P/E.

With the expectations of robust growth in the domestic steel production, demand for manganese ore is likely to increase during the next few years. The domestic manganese ore demand to grow at a CAGR of about 9% during the next 2-3 years.

After the stupendous success of Coal India IPO, the MOIL IPO too, will evoke good response from institutional and retail investors. Hence, long term investors can apply for this issue and not for listing gains alone.