The 332,243,200 equity shares follow-on public offer of NMDC, a navratna public sector undertaking, opened for subscriptions today. The price band for the issue, which will close on March 12, 2010, has been fixed at Rs 300-350 per share.
The government has offered a discount of 5% to the offer price to retail individual bidders and eligible employees.
Experts’ opinions were mixed on the issue but they have reached a consensus on the pricing—that it should have been at or below Rs 300 instead of this price band of Rs 300-350. Investment Advisor, SP Tulsian adviced retail investors to apply at Rs 300 per share. R Venkat Subramanian, CIO of Infina Finance Pvt Ltd says, at around Rs 300 maybe it is worth giving a shot. However, Paresh Jain of Angel Broking advised an avoid on the issue.
SP Tulsian said, “We feel that post this issue, share price will correct to its realistic levels, due to increase in float to over 11%, which in our view would be around Rs. 300 per share. So, it is advised to apply in the issue at the lower band of Rs 300 per share and advice is to refrain from applying at the cut off. In all probability, book is likely to get discovered at Rs 300 per share. Hence, it would have been prudent on part of the Govt. to announce the band with narrow range of Rs 25. This wide range of Rs. 50 in price band, indicates lack of confidence, even on part of the Govt. Even QIB category is likely to see offer coming in at around Rs 300 per share. If price gets discovered at Rs 300 per share, net cost of acquisition to them will be Rs 285 per share, which will leave some profit on the table for the prospective retail investors. If by chance, price gets discovered at Rs 350, due to good response of QIB, it may not sustain on listing of new shares due to increase in float.”
Manish Bhatt of Prabhudas Lilladher says, one should subscribe to the issue at cut-off price with one-year horizon. He expects the pricing may be around Rs 300 per share, so that investors will get shares at Rs 285.
R Venkat Subramanian said, “NMDC price is still a bit of a tough range. I think Rs 250-275 range would have made it very attractive and at Rs 300 it is sort of neither here nor there. So I think at Rs 300 or above Rs 300, the investment bankers would have tough job on their hands. Otherwise the environment is extremely favourable for NMDC, the headlines for iron ore and any kind of resource is so strong that generally there should be investor appetite, there maybe a little bit of churning from even some of the global mining companies that investors are holding into something like NMDC. So it is okay but not great kind of pricing.” “I would think that something like a SAIL is cheaper than NMDC but around Rs 300 maybe it is worth giving a shot,” he has said.
Krishna Kumar Karwa, MD of Emkay Global Financial Services said, “From an investor perspective looking for listing gains probably this is not the issue to subscribe for but from a long-term perspective this is a good investment opportunity. So we are expecting institutional support for the issue and the retail investors’ response maybe slightly lukewarm.
Sandeep Madan, High Networth Individual says, “It is a skip for now, not because of NMDC itself, but because of the way the government has been pricing its issues, FPOs in the recent past. Rs 300 too in my mind is a price which is on the higher side based on all the parameters that one has there to analyse.
Paresh Jain of Angel Broking advised a avoid on the issue.
Amit Dalal, Executive Director of Tata Investment Corporation says, the discount to market price is something that could attract investors and perhaps hopefully there will be larger list of FIIs who will participate in this issue than what we saw in NTPC. “The whole space has become quite expensively priced though iron ore prospects are very good next year, prices of the iron ore have been revised upwards. So they do have an earnings growth potential next year which is perhaps even as good as what we saw last year but issue expensively valued undoubtedly,” he has said.
Source : Money Control
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