State-owned steel company Mishra Dhatu Nigam (MIDHANI) opened its initial public offering (IPO) for subscription on March 21, with a price band of Rs 87-90 per share. The offer will close on March 23.
The IPO comprises of an offer for sale of 4,87,08,400 equity shares by the President of India acting through the Ministry of Defence, which consists of a reservation of up to 18,73,400 equity shares for eligible employees.
The company intends to raise Rs 438.4 crore through the issue at higher end of price band.
As it is an offer for sale, the company will not receive any proceeds from the offer and all proceeds shall go to the government.
SBI Capital Markets and IDBI Capital Markets & Securities are the book running lead managers to the offer. Equity shares are proposed to be listed on BSE and NSE.
Brokerage: ICICIdirect | Rating: Avoid
Midhani is the only company in India to carry out vacuum based melting and refining through a world class vacuum melting furnace. This enables the company to venture into new markets with innovative and advanced products.
At the higher price band of Rs 90, the issue is priced at 8x EV/EBITDA FY17 and 13.3x on FY17 EPS. The order book visibility remains thin. Hence, we recommend that investors avoid subscribing to this IPO.
Brokerage: Prabhudas Lilladher| Rating: Subscribe
The current order book stands at Rs 5.17 billion which includes Rs2.8bn/Rs1.7bn from Defence/Space sectors to be executed over 12 month’s period. It produced 6150 tonnes in FY17, growing at a 5-year CAGR of 12%.
It is planning to setup new plants at Rohtak & Nellore at a capex of Rs 1 billion to be spent over 2-3 years. Company will manufacture bulletproof Jackets, bulletproof vehicles and armour products, etc at Rohtak Plant. Plant is expected to be commissioned by the end of FY19.
The company has steadily launched new products through inhouse R&D and tech ties-up to meet the growing domestic aerospace and defence demand.
Volumes have doubled over the last six years as the company ramped up its new capacities setup in FY14 amid rising demand from domestic aerospace.
We believe the company is in sweet spot given the expected surge in demand and its tie-ups with major producers. FY18 performance is expected to be subdued due to shutdown of key plant for upgradation and maintenance.
Brokerage: Hem Securities| Rating: Avoid
The company is bringing the issue at P/E multiple of almost 29 on post issue H1FY18 annualized EPS at price band of Rs 87-90/share. Although company has most advanced and unique facilities & capability to manufacture wide range of advanced product but weak order book size of Rs 517 crore against strong topline in FY16 & FY17 doesn’t infuse optimism in company. Hence, we recommend avoid on issue.
Brokerage: Mehta Equities| Rating: Subscribe
We feel it’s a good opportunity to invest in leading manufacturers of high speciality steel, Superalloys and only manufacturer of titanium alloys in India.
We expect company to continue its healthy topline as well as bottom line growth with CAGR around 10% going forward. Hence, we recommend investors to subscribe on the issue for a mid-to-long term period.moneycontrol