Update on MOIL IPO

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MOIL IPO: subscripttttion of 2.37 times on Day 2

The initial public offering of state-run MOIL (Manganese Ore India), a Miniratna public sector undertaking and the largest producers of manganese ore by volume in India, subscribed 2.37 times on day two.

The issue will close on Dec. 1, 2010 for retail investors and on Nov 30, 2010 for Institutional Investors. The face value is Rs. 10 a share and the price band for the issue is Rs 340-375. It is a 100% book building process aggregating over Rs 12.3 billion.

A total of 79.46 million applications were received as against issue size of 33.6 million. 

The initial public offering (IPO) of manganese miner MOIL was bid 55 times the offer, the highest for an IPO since May 2009, as doubling of retail investment limit and attractive pricing pulled investors . The Rs 1,238-crore share sale drew investors from the institutions and individual investors alike, following the gains made from buying shares in another state-owned miner Coal India last month.

The 3.36 crore equity share issue was subscribed more than 49 times in the portion reserved for institutions , data from stock exchanges show. The portion reserved for wealthy, or high net worth individuals , was bid 143 times, while the retail portion, where limit was doubled to Rs 2 lakh per application was subscribed more than 28 times. Most of the bids were at the top end of the Rs 340-375 a share price band.

“There is a lot of appetite for PSU issuance's provided it is priced right,” says Jagannadham Thunuguntla , strategist & head-research at SMC Global Securities. MOIL accounts for 50% of India’s total manganese ore production with an annual output of 1.1 million . It is a debt-free company with cash reserves of . 1, 770 crore, implying a cash per share of Rs 105, to fund capex and working capital requirements.

Its pre-tax margin for last fiscal was 70% and net profit margin was 52%. MOIL’s revenue has grown at an annual rate of 31.5% between 2006 and 2010 on rising output and soaring prices. Investors have been choosy in bidding for IPOs unlike during the past secondary market rallies, when there was a rush to bid for any share sale.

Even the stateowned share sales have seen differing approaches from investors. While Coal India’s $3.4-billion IPO was a spectacular success, other share sales such as miner NMDC and utility NTPC got tepid response. Drugmaker Claris Life last week had to cut IPO price after investors shunned the issue. It closes on December 2. The government has raised over Rs 21,000 crore this fiscal selling shares including in companies such as Power Grid Corp.

The strong response to issues such as MOIL, may help it surpass the target of Rs 40,000 crore. The government sold the MOIL shares in a price band of Rs 340-375 and promised a 5% discount to retail investors and the company staff of 6,734. Nearly half of them may have applied, unlike in Coal India, where trade unions prevented staff from buying its shares, leading to a notional loss of about Rs 40,000 on listing.