Mishra Dhatu Nigam IPO review (Subscribe for Long Term)

Review By Dilip Davda on Mar 14, 2018

Mishra Dhatu Nigam Ltd. (Popularly known as MIDHANI) is specialty metal PSU and one of the leading manufacturers of special steels, Superalloys and only manufacturer of titanium alloys in India. These are high value products which cater to niche end user segments such as defence, space and power. The company was established with an aim of achieving self-reliance in the research, development and supply of critical alloys and products of national security and strategic importance. It has emerged as a 'National Centre for Excellence' in advanced metallurgical production of special metals and Superalloys in India. It enjoys status of a Mini Ratna, Category-I company.

MIDHANI is one of the few metallurgical plants of its kind in the world, designed to manufacture a wide range of special metals and alloys using integrated and highly flexible manufacturing systems. It manufactures unique combinations of metal and alloys. These special alloys have superior mechanical properties and better workability which are essential for special applications in aerospace, power generation, nuclear, defence and other general engineering industries. Company has the competence of developing and manufacturing customised alloys tailor-made to suit the specific requirements of customers for their critical applications. Presently, it operates from the manufacturing facility in Hyderabad and is in the process of setting up two new manufacturing facilities in Rohtak and Nellore. MIDHANI's R & D facility is accredited to National Accreditation Board for Testing and Calibration Laboratories.

Mishra Dhatu Nigam
For disinvestment target and listing benefits, MIDHANI is coming out with a maiden IPO of 48708400 equity shares of Rs. 10 each via book building process with a price band of Rs. 87-Rs. 90 to mobilize Rs. 423.76 to Rs. 438.38 crore (based on lower and upper price bands). Issue opens for subscription on 21.03.18 and will close on 23.03.18. Minimum application BRLMs to this offer are SBI Capital Markets Ltd. and IDBI Capital Markets & Securities Ltd. Alankit Assignments Ltd. is the registrar to the issue. Issue constitutes 26% of the post issue paid up capital of the company. Its entire equity is issued at par. Post issue, it's paid up capital remains same at Rs. 187.34 crore as entire issue is by way of Offer for Sale (OFS). Average cost of acquisition of shares by the promoters is Rs. 10 per share.

On performance front, for last three fiscals, MIDHANI has posted turnover/net profits of Rs.678.39 cr. / Rs. 103.63 cr. (FY15), Rs. 790.45 cr. / Rs. 119.37 cr. (FY16) and Rs. 833.09 cr. / Rs. 126.31 cr. (FY17). For first half of the current fiscal, it has earned net profit of Rs. 27.30 cr. on a turnover of Rs. 220.66 cr. First half decline in top and bottom line is due to shut down of its main plant for maintenance after a gap of around 32 years and hence it might suffer a setback. However, company is expected to recover once it goes on stream once again by April 2018. For last three fiscals, it has posted an average EPS of Rs. 6.42 and an average RoNW of 18.58%. Issue is priced at a P/BV of around 2.3 based on its NAV of Rs. 39.15 as on 30.09.17. Although management has clarified for decline in top and bottom lines, if we annualize latest earnings and attribute it on post issue equity then asking price works out at a P/E of around 30, but if we consider FY17 earnings, then P/E comes to around 13.4 which augurs well. Company enjoys virtual monopoly in its field. It has no listed peers to compare with. It enjoys three decade plus relationships with its major customers. For last three fiscals it has posted CAGR of 11.1% in top line and 10.4% in bottom line.

On BRLM's front, two merchant bankers associated with the offer have handled 19 public offers in the past three years, out of which 6 offers closed below the offer price on listing date.


Conclusion / Investment Strategy

First half results are affected with unwarranted situation like maintenance of plant under taken after three plus decades. Management is confident of achieving improved performance once they are back to normalcy after restart of the plant. Based on normal working, issue is priced reasonably. Investors may consider investment for long term.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Mar 14, 2018

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Mishra Dhatu Nigam IPO FAQs

  1. 1. Why Mishra Dhatu Nigam IPO?

    The initial public offer (IPO) of Mishra Dhatu Nigam Limited offers an early investment opportunity in Mishra Dhatu Nigam Limited. A stock market investor can buy Mishra Dhatu Nigam IPO shares by applying in IPO before Mishra Dhatu Nigam Limited shares get listed at the stock exchanges. An investor could invest in Mishra Dhatu Nigam IPO for short term listing gain or a long term.

  2. 2. How is Mishra Dhatu Nigam IPO?

    Read the Mishra Dhatu Nigam IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Mishra Dhatu Nigam IPO what should investors do?

    Mishra Dhatu Nigam IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Mishra Dhatu Nigam IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Mishra Dhatu Nigam IPO good?

    Our recommendation for Mishra Dhatu Nigam IPO is to subscribe for long term.

  5. 5. Is Mishra Dhatu Nigam IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Mishra Dhatu Nigam IPO.

  6. 6. When will Mishra Dhatu Nigam IPO allotment status?

    The Mishra Dhatu Nigam IPO allotment status will be available on or around Mar 28, 2018. The allotted shares will be credited in demat account by Apr 3, 2018. Visit Mishra Dhatu Nigam IPO allotment status to check.

  7. 7. When will Mishra Dhatu Nigam IPO list?

    The Mishra Dhatu Nigam IPO will list on Wednesday, April 4, 2018, at BSE, NSE.
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