MOIL IPO - Subscribe *****

The issue of Manganese Ore India Ltd. is very attractively priced. Since, the issue is an offer for sale, there is no fresh issue of equity by the company. The money raised from the IPO will go directly into the coffers of the promoters, ie. the Central Govt., State Govt. of M.P. and Maharashtra. The issue is priced @ Rs. 340-375 and will be open for subscription from November 26,2010 - December 1, 2010. The retail cutoff should be Rs. 356.25.

From, a plain trailing 12 months PE, it is priced at a PE of 12.29. This PE is inflated because of lower profits in the previous year due to a 60% fall in manganese prices like all metal ore prices. When we take a 2-year average, it works out to 10.6 with an average EPS of 10.59.

Some facts which are disguised are:

* Cash Balance of Rs. 1482 crores working out to Rs. 88/share

* Debt-free status

* Net Cash adjusted PE is 10.85 after deducting cash from BV and interest income from profit.

* High EBITDA margins (65% + to be maintained as indicated by management)

* ROE above 25% consistently.

* 25% Dividend Pay Out Ratio

The company currently produces just in excess of 1.17 MT. It has proven and probable reserves of near 69 MT. There is plan of steady increase in output and reserves are definitely there. The average realisation last year was Rs. 11,600/MT. The mines are in M.P. and Maharashtra and there is not any mention of Maoist disturbance.

The company is also investing steadily in wind energy. It also has a JV with SAIL for a ferro-manganese plant but the contribution of these projects is not that significant yet.

For all the positive reasons, I cannot think of why one should not subscribe to this IPO. It is very attractively priced, and one can apply with full amount of Rs. 2,00,000 and lap up one of the few things that the government actually gives to the public.