MOIL IPO massively oversubscribed by 55-60 times as expected

Manganese Ore India Limited (MOIL),the government owned miner has seen massive oversubscription of its IPO being subscribed 55 times and should easily reach around 60 times.I had written that the MOIL IPO price of Rs 340-375 makes the valuation hugely attractive which would lead to oversubscription.The fundamentals of this stock easily command a much higher price given its low cost leadership position in the fast growing Indian market.The valuation of the company was compelling even at a 25% higher price point as I had written earlier but at around Rs 6300 crore,MOIL had become a no brainer.

Valuation

MOIL has a Net Worth of Rs 1860 crores and a NAV of around Rs 110/share.The Company will probably earn around Rs 700 crore this fiscal year after doing Rs 465 crores last year (which was a bad year for the industry).Operating Cash Flow has been generally higher than the Net Profit leading to improved cash position over the last 4 years.The Capital Requirements of the Business is quite low leading to high Return Metrics.If the Government sells the 20% stake at Rs 1500 crore that would give the company a market cap of Rs 7500 crore.Taking out the Rs 1700 crore in cash would make the company be valued at 3.2x BV and 8-9x P/E.This is a sharp discount to Global Mining Companies.

While some of the oversubscription could also have been due to people’s expectation of oversubscription,I think most of the demand  was fundamental in nature.The Indian primary market is showing huge demand for quality stocks.Junk IPOs unless  they are not manipulated are showing weak demand .Somewhat doubtful IPO of Claris Lifesciences was forced to decrease its price by 20% as there were not enough takers for the issue.The Retail Portion will also be oversubscribed by 30 times which means that allocation would be quite low even in this investor segment.For the leveraged subscribers,the low allocation would mean that the profits on flipping would be quite low even if the listing gains are high.For the long term investors,the listing gains should not matter much.