Close on the heels of the tremendous success of Coal India IPO, one more from IPO from the government. MOIL, formerly known as manganese ore (India) limited, the largest producer of manganese ore by volume, in India, is entering the capital markets in November. MOIL public offerings consists of 3, 36, 00,000 equity shares of Rs 10 each, in the price band of Rs 340-375. The issue is attractively priced. Edelweiss Capital J P Morgan and IDBI Capital markets are the BRLMs.
BUSINESS AND BACKGROUND:
MOIL is the largest producer of manganese ore, accounting for 50% of the total ore produced in the country. Manganese ore is primarily used to make ferro-alloys for steel production. Manganese is the fourth most used metal after iron, aluminum and copper. It improves the strength, toughness, hardness and workability of steel.
The company has long operating history of mining manganese ore in the country for more than four decades.
Over 90% of the world’s production of manganese is utilized in the desulphurization and strengthening of steel. MOIL’s production of manganese ore increased from 864,890 tonnes in Fiscal 2006 to 1,093,363 tonnes in Fiscal 2010.MOIL’s ore reserves have an average manganese content of 36.0% -40.0%. In addition, none of the MOIL mines produces low-grade manganese ore. The company has access to approximately 22.0 million tonnes of proved and probable reserves and 37.2 million tonnes of measured mineral resources of manganese ore.
The company currently operates seven underground mines and three opencast mines. MOIL produced 700,776 tonnes of manganese ore from our underground mines and 392,587 tonnes of manganese ore from our opencast mines in Fiscal 2010. India was currently the fifth largest producer of crude steel in the world in 2009 and is expected to become the second largest producer of crude steel in the world by 2015-2016.
FINANCIALS:
RS IN CRORES
|
|
2008 |
2009 |
2010 |
|
TOTAL INCOME |
1015.44 |
1439.40 |
1087.85 |
| NP AFTER TAX | 479.81 | 663.79 | 466.34 |
| EPS | 27.47 | 41.09 | 27.72 |
| RONW | 59% | 52% | 28% |
NAV as on 31-03-10 is Rs 100/-
For the quarter ended June -10, the total income and profit after tax was Rs 373cr and Rs 182cr respectively.
OBJECTS: Disinvestment by the government.
STRENGTHS:
1. Largest producer of manganese ore in India with access to significant reserves
2. Well positioned to capture the growth potential of the Indian steel industry.
3. Track record of growth and efficient operation.
4. Strategic location of the mines provides the competitive advantages.
5. Strong capabilities for exploration, mine planning and research development.
Domestic demand-supply scenario in India
Demand for manganese ore and ferro alloys has increased considerably due to the increase in the production of steel. According to the National Steel Policy, projected steel production is likely to double within a decade’s time. There is likely to be a huge demand gap between the availability and requirement of ferro alloys if the production of ferro alloys fails to match the growth in production of steel. Slower pace in the development of new mines as against the robust demand from the steel industry has already pushed India in becoming a net importer of manganese ore in the last 3 years.
Outlook of Manganese ore:
With the expectations of robust growth in the domestic steel production, CARE Research foresees, demand for manganese ore is likely to increase during the next few years. CARE Research foresees the domestic manganese ore demand to grow at a CAGR of about 9% during the next 2-3 years and reach levels of 4.1 million TPA by FY12. The rising requirement of ferro alloy products for the steel and other metal-producing industries are likely to be the prime reason for a growth in the domestic demand for manganese ore.
VALUATION AND RECOMMENDATIONS:
Being the largest producer, MOIL is advantageously placed in the sector. The India growth story intact, the demand for manganese ore likely to increase in the years to come. There are no companies listed in this sector, which can be strictly compared to MOIL. However, NMDC and Sea Goa are the nearest ones. At Rs 340-375, the issue is attractively priced, leaving some thing on the table for the retail investors. INVEST.
