MOIL initial offer subscribed over 29 times on Day 3

Manganese ore producer MOIL’s initial public offering (IPO) was subscribed over 29 times on Tuesday, the last day of subscription for institutional buyers, as attractive pricing lured every segment of investors.

The portion reserved for institutional investors was subscribed 49.16 times on Tuesday, while those reserved for retail and non-institutional investors, for which the issue closes on Wednesday, were subscribed 10.86 times and 8.77 times, respectively.

“There is lot of interest in mining companies worldwide,” said Gyan Mohan, head of investment banking at IDBI Capital, which was one of the lead managers for the issue. Edelweiss Capital and JP Morgan were the other lead managers.

All leading broking firms have advised their clients to subscribe to the MOIL issue due to its attractive pricing. The price band for the issue has been fixed at Rs 340-375.

“Given the robust demand outlook for manganese ore and company-specific positives, such as largest and lowest cost producer of manganese ore in India with 50 per cent share, strong balance sheet and robust cash flows, we recommend ‘subscribe’ to the issue,” analysts at Mumbai-based brokerage IIFL said in an IPO note to clients.

MOIL targets to increase the manganese ore production to 1.5 million tonnes by 2014-15 from 1.1 million tonnes in 2009-10. It has a cash reserve of about Rs 1,700 crore. “Considering the steady growth plan and attractive valuation, we recommend ‘subscribe’ to the issue,” said Giraraj Daga, analyst at Centrum Broking, in a research note. At the upper price band of Rs 375, he estimates MOIL to trade at price-to-earnings (P/E) of 8.2 times and 7.6 times for 2011-12 and 2012-13, respectively.

The Indian government is selling 10 per cent in the MOIL issue, while the state governments of Maharashtra and Madhya Pradesh are divesting five per cent stake each. At Rs 375 per share, the issue of 33.6 million shares will fetch over Rs 1,200 crore to the selling shareholders.