Tag: ipo

Manganese Ore India Limited – MOIL – IPO – Post review

Leave a comment
  • MOIL IPO was a stunner – over 55 times subscribed – this is too much.
  • Retail it was 33 times. Too bad guys – chances are allotments may not be more than 20-22 shares at cut – off. Worth about Rs 8000 for Retail.
  • The interesting thing will be to see the appreciation on listing. CIL inspite of it’s size was only 15 times over. It gave a listing pop of 45%.
  • But with MOIL we are in new territory. Smaller cap listing, higer oversubscription, good basic assets.  50%? 60%? Lets wait and see ….
  • The lesson from CIL is that HNI is moving to Retail (quota) . Retail gets more shares allocation. Of course the new increased 2L limit for Retail helps, as does the 5% additional discount on PSU offerings.
  • Also see analysis of MOIL IPO – Click link

SCI FPO analysis – closing 3rd Dec

1 Comment

Key points

Business aspects

  • SCI commands 35% of the Indian flagged tonnage, which again is about 10-11% of India’s ports based import export. Foreign carriers dominate, but this may change soon.
  • Exports and imports are growing by 21.4 per cent and 23.2 per cent this year, which are largely executed through shipping. This indicates a robust demand. Coal & crude imports are expected to accelerate.
  • Key indicators of pricing are Baltic Dry Index and the Baltic Tanker Indices. These peaked in early 2008, fell to lows in 2009, are stabilizing in 2010, and are expected to recover in 2011 along with rebound in global economies and trade.
  • SCI profits also have shown a recovery trend in 2010.
  • SCI is seeing the need to invest in new assets to – replace an ageing fleet and – meet growing demand. This FPO will be followed by large order placements, both deploying FPO funds, cash from operations and raising debt.

Unique strengths of SCI:

  • A diversified fleet (bulk carriers, crude/oil products tankers, container vessels, etc.) that caters to all types of cargo for domestic and international markets
  • Relationships with PSUs like Coal India and SAIL – bhaichara – that can grow a lot
  • Cash on hand is Rs 49 per share (post FPO). This is a good statistic. It means you are paying only Rs 84 per share for the running business of SCI.

Pricing and key ratios

  • At today’s CMP, SCI is close to it’s 52 week low. Peak this year was Rs 192, on Oct 2. A fall of 30% in one month, perhaps on news of FPO pricing. Also dilution of equity in this issue by 10% only explains part of this fall.
  • SCI FPO pricing at Rs. 133 (for Retail with upper end of Rs 140 less 5%) is P/E of 8.5 times, which is favourable compared to current Industry P/E of 16.71 (all are ttm figures)
  • Dividend yield at 3.4% of CMP is attractive.
  • FPO offer is at P/B of 0.9 – which is attractive.
  • CMP today (2nd Dec) is 146.8, so FPO (at 133) is at a discount of 10.3%
  • Current D/E ratio of 0.43 is comfortable and will fall further post FPO. Then gain due to the expected investments in assets.

Conclusion and FPO investment expectations

  • The issue is attractive, and the CMP has dipped over the last month on FPO pricing considerations.
  • My feel is the stock should retrace to 165 range post FPO (25% up from 133), then move thereafter based on business performance and overall Sensex directions . (Which both look positive)
  • Overall it is a liquid, steady PSU stock with a good brand name. Good long term holding stock.

Subscription details and allotment possibilities

  • Subscription position as of 02 December 2010: QIB – closed at 4.2 times over subscribed; HNI at 0.28 times and Retail at 0.56 times – closing on Dec 2rd.  Looks like post CIL IPO, HNI has shifted to Retail .. :-)
  • My feel is given some Retail interest in MOIL (this being an overlap period – why cant these guys schedule their offerings better) the Retail should be in 2 – 3 times subscription range tomorrow.
  • This should give allotment of max Rs 80,000 worth shares on subscription of 2L.
  • To get firm allotment, invest in 1400 shares at cut off (140) for total investment Rs 196000.

(2nd Dec 2010)

Also see a post closure report – click link

Manganese Ore India Limited – MOIL – IPO – 29th November

Leave a comment

Analysis of MOIL IPO:

Positives:

  • Steel industry in India is a solid 9% a year growth industry. Manganese ore is an essential raw material.
  • Good mining reserves, 50% of market share of Manganese ore produce in India
  • 5th largest producer in the world; Lowest cost producer in the world. Has a good chance to have leading margins among Manganese ore producers for many years
  • At Upper end of pricing, valuation will be 9.5 times estimated FY 11 revenues – fair valuation
  • Debt free with Cash on books of Rs 105 per share – means that at Rs 375 per share pricing, we are actually paying only Rs 270 for the running business.
  • IPO Grade 5/5 from credit rating agency CARE
  • Recent success of Coal India IPO – some similarities can be drawn with MOIL – dominating market share; PSU; long experience in sector; ownership of low cost mines
  • Also, similar to CIL, Indian and FIIs will be queuing up to invest in the Basic material assets of India. I expect high over-subscription and demand on listing
  • 5% Retail discount is a plus

Negatives:

  • Input for Steel industry – so demand is a function of Steel demand, which has a vicious cyclical behavior
  • Future performance can be affected by permits & permission grant by Environment Ministry
  • Retail investment cap is Rs 2L – this has attracted larger subscription. Nov 29 data is – 2.8 times subscription for Retail, – 2.4 times for HNI and – 2.14 times for Institutions.
  • As a PSU – one cannot expect rapid decision-making, quick investments and capacity expansion, or growth. Hopefully there may not be interference from government or subsidy issues – this market messing up is limited to Petroleum sector

What to do now?

  • We need to watch the Nov 30 numbers, as institutional demand of over 7-10 times will be a big positive.
  • We also need to watch Retail subscriptions. My feel is that Retail may get over-subscribed 5-7 times. This will mean a 2L investment by Retail will yield about Rs 30k worth of shares.
  • However watch for Retail crossing 7 times. This is negative/ result in lower allotment
  • Barring any hiccups, I expect a 20% appreciation on listing, to about Rs. 450 range.
  • To get firm allotment, subscribe for 527 shares (31×17) at cut off – invest Rs 1,97,625.

Also see post closure report on MOIL IPO – click Link

Power Grid FPO – Nov 2010

Leave a comment


While all analysts and reporters are talking endlessly about Power Grid FPO in the shadow of the Coal India IPO, see link,
http://economictimes.indiatimes.com/quickiearticleshow/6893599.cms

I wonder if anyone has given thought to the risks around this offer :
· High Debt – at around 37k crores (March 2010), debt is high. The D/E ratio is 2.18. And one of the purposes of this FPO is to raise additional equity and reduce the D/E ratio, and at a later stage, also raising additional Debt. Much of the debt is from low cost funding agencies. However it has to be repaid eventually, right?
· Dilution of Equity – dilution of 10% by fresh issue available and being offered in this FPO. This means that EPS will fall proportionately, so a Rs 105 stock (at constant PE and earnings) should fall to 94.5 Rs post FPO.
· Underperformance of stock compared to Sensex – see graphic attached. Over last 2 years, PGCIL has underperformed the Sensex.


· Limited upside – Returns are capped; performance of PGCIL depends on energy generation by power plants, and there have been delays in commissioning of power gen plants.
· Past year has seen a go slow in awarding of projects for setting up transmission lines (I own KEC International, a downstream EPC firm. Thats another story).
Comparisons with Coal India are difficult to defend, even though there is a public sector monopoly –
· This is a highly capital intensive sector
· Derived Demand – PGCIL revenues are derived from the performance of power generation plants.
I would say a more balanced view is required.
· FPO is 10 times oversubscribed yesterday – this is a good sign.
· Expectations are that several projects of this company will be commissioned in the next few months, this will drive up revenues and profits
Personally I would like to nibble at this FPO, rather than take a large bite. If you have a Core and Satellite portfolio, this can be a small, defensive, market performer holding.

Coal India IPO note – published on Sat, Oct 23, 2010

Leave a comment

I am positive on CIL as a company, and the IPO, for the following reason
· Indian industry needs Coal, and CIL has 80% of market share, with all production being lapped up by consumers
· India will stay energy deficit for a while to come.
· Our energy consumption is still tilted towards coal (for power generation)
· CIL is profitable and is looking at steady capacity growth and margin improvement
· CIL has communicated that
– it is aware that coal is of low quality and is improving output quality by investing in washeries
– that mining is destructive to environment, and has committed to extensive re-forestation and CSR
· The competing energy sources – Gas, fuel oils, nuclear – are low in terms of available / discovered reserves in India
· Hydro has larger environmental impact and R&R issues.
· Alternative energy like solar, wind, etc are expensive, difficult to scale up. It will take time for these technologies to become feasible. I lost my shirt in Suzlon ;-)
· I believe that organisations like ONGC and CIL will in the years to come, invest in and transition to sustainable technologies and operations for energy production, as they become feasible.
· In terms of pricing and immediate returns outlook, CIL is attractive.
· At 15 times over subscribed for the largest Indian IPO by size, we have a stunning signal for the markets – very positive indeed.
· I classify CIL as same category as ONGC, a safe long term investment, one must not expect too much from it.