NMDC FPO –Avoid- Angel Securities
NMDC Follow on Public offer (FPO) opens on 10 March and closes on 12 March, 2010.
The FPO entails issue of 33.2 crore equity shares priced in the band of Rs300-350. The company will raise between Rs9,900-11,600 crore depending on the cut-off price.
The issue of 33 crore equity share by Government of India (GoI) represents 8.38% of the total outstanding share capital of the company. Retail Investors are entitled for a 5% discount of the issue price. Post the issue the government holding will be around 90% of the total share capital.
The company will not receive the offer proceeds as it is a part of Government divestment plan.
NMDC, India’s leading iron ore producer benefits from huge iron ore reserves, better quality ore and low cost advantage. At the lower price band, NMDC is trading at 12.6x and 9.6x FY2011E and FY2012E EV/EBITDA while at the upper band it is trading at 15.1x and 11.5x its FY2011E and FY2012E EV/EBITDA. In comparison to Sesa Goa (only listed domestic iron ore company), which is trading at 7.8x and 6.4x FY2011E and FY2012E EV/EBITDA, we feel that the FPO pricing is overpriced. We recommend an AVOID on the FPO.
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Category: IPO
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