The government is  selling 10% stake in MOIL Limited at a Price of Rs365/Share through an Offer for Sale (OFS). The price is at a 4.6% Discount to the current Market Price. Retail investors will get a further discount of 5 per cent in the offer for sale (OFS). The government currently holds 75.58 per cent in MOIL, formerly known as Manganese Ore India Ltd. MOIL OFS is likely to fetch Rs. 472 crore to the Government. Earlier this financial year, the government had raised about Rs 794 crore through share buyback of MOIL.

FINAL RESULT : MOIL OFS,  subscribed heavily. Retail Investors who have bid in excess of 377 or better near to 378  (Less 5% discount) may only get allotment.
The last OFS of a Central PSU was that of NBCC which raised around Rs2,200 crore and had evoked good response and also more or less  lived up to the expectations of investors subsequently. The government has so far raised about Rs 30,000 crore through minority share sale by way of OFS, share buyback and CPSE ETF so far in the current financial year. Last week, the Department of Investment and Public Asset Management (DIPAM) rasised Rs. 6000 crore through the second tranche of CPSE Exchange Traded Fund (ETF) which was over-subscribed 2.30 times. 

About MOIL OFS

Issue Period of MOIL OFS24 Jan 2017 to 25 Jan 2017
 January 24, 2017 for Non Retail Investors and January 25, 2017 for Retail Investors and Non Retail Investors who choose to carry forward their bids
StartTime09:15
EndTime15:30
Offer Size for Retail Investors2663756  Shares
Offer Size for Non Retail Investors10655024 Shares
Face Value10
Floor Price365
Selling MemberEdelweiss Securities Ltd , IDBI Capital Markets & Securities Ltd 
Seller PromoterThe President of India,acting through and representated by the Ministry of Steel,Government of India

Retail investors, for whom 20 per cent of the MOIL OFS would be reserved, will get a further discount of 5 per cent in the offer for sale (OFS). Retailers are those who put in bids for less than Rs 2 lakh. 

About The Company :

MOIL is a Schedule “A” Miniratna Category-I Company. It was originally incorporated as Manganese Ore (India) Limited in the year 1962. During the Financial year 2010-11, MOIL got listed and after the listing, the shareholding in the company, of Govt. of India, Govt. of Maharashtra and Govt. of Madhya Pradesh is 71.57%, 4.62% and 3.81% respectively. Rest 20% shares are held by the public.

At present, MOIL operates 10 mines, six located in the Nagpur and Bhandara districts of Maharashtra and four in the Balaghat district of Madhya Pradesh. The Balaghat Mine is the largest mine of the Company. The mine has now reached a mining depth of about 383 meters from the surface. Dongri Buzurg Mine located in the Bhandara district of Maharashtra is an opencast mine that produces manganese dioxide ore used by dry battery industry. This ore in the form of manganous oxide is used as micro-nutrient for cattle feed and fertilizers. MOIL fulfills about 50% of the total requirement of dioxide ore in India. At present, the annual production is around 1.1 million tonne which is expected to grow in the coming years.

MOIL produces and sells different grades of Manganese Ore.  They are:-
• High Grade Ores for production of Ferro manganese
• Medium grade ore for production of Silico manganese
• Blast furnace grade ore required for production of hot metal and
• Dioxide for dry battery cells and chemical industries.

MOIL has set up a plant based on indigenous technology to manufacture 1,000 MT per annum capacity of Electrolytic Manganese Dioxide (EMD). This product is used for the manufacture of dry battery cells. A Ferro manganese plant having a capacity of 10,000 MT per annum was also set up in 1998 by MOIL for value addition. MOIL has also installed 4.8 MW Wind Energy Farm and 15.2 MW Wind Farm a.

Moil first came out with an IPO in Dec 2010 which was  after the highly successful IPO of coal India. The retail investors who got shares  @ 356.25 /- in IPO in 2010 Dec (Price Band Rs 340-375 per share)  have made little money and MOIL share was quoting much below the IPO Issue price for most of the years even as the initial listing was at Rs. 551/-.

New Sebi Guidelines in OFS (from NBCC OFS onwards) : As per the new SEBI guidelines, only non-retail investors are allowed to place their bids on 24th Jan 2017 (T Day)  and retail investors are allowed to bid on 25th Jan 2017 (T+1 day). The retail investors have the option to place a price bid or opt for bidding at cut off price. The new arrangement provides retail investors the benefit of discovering the cut off price of T day and place their bids on T+1 day on a more informed basis than was the case earlier. As usual retail investors i.e. those investors who place bids for shares of total value of not more than Rs.2.00 lakh, will in addition be entitled to a 5% discount. 

Financials:

Quarterly Results (Figures in Rs. Crore):

 Dec-16Sep-16Jun-16Mar-16Dec-15Sep-15
Sales196.03183.53209.6287.82148.4323.02
Total Income267.49242.85288.15148.5215.5924.28
Expenses193.59158.69235.38113.4128.7316.56
PBIDT73.984.1652.7735.1286.867.72
Interest000000.52
PBDT73.984.1652.7735.1286.867.2
Depreciation12.812.0614.3513.6312.681.29
PBIDT61.172.138.4221.4974.185.91
Tax19.6324.9517.048.3425.621.61
Profit After Tax41.4747.1521.3813.1548.564.3
Equity1681681681681688.51
Face Value101010101010
EPS (not annualized)2.472.811.270.782.895.05
EPS (TTM)7.33     
Floor Price365     
PE (TTM)49.8     
Qtrly Sales yoy32%     
Qtrly NP yoy-15%     
Qtrly Sales qoq0.07     
Qtrly  NP qoq-0.12     
MOIL offered Buyback of its shares in Aug-Oct 2016 and the  company offered to buyback of 3,48,12,196 equity shares at Rs. 248 per share. Hence post the completion of buyback, in Oct 2016, the company’s equity was reduced by 20% to 133 mn shares from 168 mn shares earlier. Thus the EPS  reported above is actually higher by 20-25% and PE ration reported shall stand lower.



Annual Results
(Figures in Rs. Crore):

 

Mar-16Mar-15Mar-14Mar-13Mar-12
Sales628.74823.251,021.28967.12899.58
Profit before tax270.25650.57769.33636.79606.63
Tax97.28222.56259.76205.06195.86
Net Profit172.98428.01509.56431.72410.77
Dividend payout48.5633.3624.7321.420.45

 

Assessment:

  • MOIL is  the largest producer of manganese ore with a 50% market share in India and 5th largest globally.
  • About 95% of the world’s total production of Manganese Ore is used directly or indirectly in steel making. Another 4-5% is used in other industries such as dry cell (batteries), chemicals etc.Thus there is strong correlation between fortunes of steel industry and Manganese ore producers.
  • MOIL Shares have gained about 50% in last six months period
  • MOIL has undertaken a major revisions in prices of various grades of manganese ore for Q4Fy17  from 01-Jan-2017 onwards. The prices of all ferro grades of Manganese ore have increased by 10%. Prices of SMGR (Mn 30%) and SMGR Low (Mn 25%) were increased by 15% &  prices of all grades of fines have increased by 15%.The prices of all chemical grades ore have increased by 10% and the  prices of Electrolytic Manganese Dioxide (EMD) has increased by 5%.
  • Earlier MOIL has taken a almost similar hike in prices on Ist  December 2016 , November 1, 2016 and Octobet 1, 2016 which is indicative of sharp increase in Manganese ore prices.
  • MOIL has a mix of underground &  Open cast mines, wherein the cost of production in underground mines is much higher than open cast mines. About 3/4 of  the manganese reserves of MOIL and more so good quality reserves are based on underground mining. Thus leads to additional costs & puts a restraint on its margins. 
  • Imposition of MIP(Minimum Imported Price)  and  extension of safeguard duties are enable larger Indian steel companies to regain  market share leading to increase in manganese ore consumption.
  • MOIL has signed an MOU with Madya Pradesh Govt on oct 27,2016 to conduct ore exploration and has been recently allotted 76.409 ha. Land in Balaghat, adjacent to the existing mines. This is likely to  help the company to boost production volume from its Balaghat mines which  is the oldest and also ts best quality Manganese ore reserve of MOIL.
  • India imports significant quantity of manganese ore and with Mining Projects recently completed and planned by the Company will help in increasing production to a level of 2.00 million MT by 2021 and 2.5MT by 2024-2025.
  • MOIL has high cash and cash equivalents which constitute more than 50% of its  market capitalization. This provides room for  high dividend payout and capital expenditure for expansion.
  • MOIL offered Buyback of its shares during August 2016 and the  company offered to buyback of 3,48,12,196 equity shares at Rs. 248 per share. Hence post the completion of buyback, in Oct 2016, the company’s equity was reduced by 20% to 133 mn shares from 168 mn shares earlier.
  • On the risk factors, MOIL Profit margins have been erratic and even though high are very much linked to Manganese ore prices in international market  which have shown significant volatility in last few yeas and are strongly linked to steel industry. On the positive side due to Chinese demand and problems in another large producer South Africa coupled with uptick in steel industry, Manganese ore prices internationally have continuously moved up after touching a low level in mid 2016.
  • The last OFS of a Central PSU was that of NBCC which raised around Rs2,200 crore and had evoked good response and also more or less lived up to the expectations of investors subsequently. However others Like REC, PFC in the past falted and gave heavy lossses t investors.
  • Investors in MOIL IPO in Dec 2010 have been losers with Retail was allotted shares at Rs. 356.5  and even though the price on listing day was much higher, the prices have been significantly lower than IPO issue price for years together.
  • Considering the unique status enjoyed by the company, large reserves which may will last for many decades, uptick in Manganese prices in international markets, revival of steel industry aided by MIP, price hikes for companys prodcuts,  other factors and recent approvals and capital expenditure for capacity augmentation,  Retail investors may take exposure in the scrip for medium to long term
  • The Floor price of MOIL OFS is considered reasonable and Retail discount of 5%, subject to price discovered in OFS is attractive. It is expected that MOIL OFS will see good demand.
  • ALERT 14:08 Hrs  Sudden jump in MOIL Price to 372 shows strength in the share and retail subscription is encouraging. Likely to see a bit of aggressive bidding towards the end. 
  • ALERT: Investors may note that response to MOIL OFS from Non Retail has been average. Further  MOIL Ltd. is not included in F&O which restricts building up of short positions and subsequent covering. Hence one must bid for a quantity that can be comfortably held on to during the fluctuations that may accompany the listing. Retail portion is however quite small being less than 100 crore and  OFS has aready been  oversubcribd in retail by 12:20 pm which could led to aggressive bidding upwards of Rs. 365. Ar bidding of Rs. 366, the cost price to investor shall be 347.7+brokerage applicable on purchase.  A higher band 370 will give investors a cost price of 351.5+brokerage.
  • I intend to apply in MOIL OFS in small numbers to get a allocation  but would not bid very aggressively and in quantities that can be held for medium term

Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.