NMDC slumps ahead of FPO pricingSI Reporter / Mumbai March 08,...

NMDC slumps ahead of FPO pricing
SI Reporter / Mumbai March 08, 2010, 9:09 IST

NMDC has dropped sharply in opening trades ahead of its announcement of a follow-on public offer (FPO) price.



- NMDC consortium pitches for $230-mn buyout of Aussie mine
- Markets at a glance
- Success hinges on pricing
- NMDC to double iron ore output to 50 mn tonnes by 2015


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The stock opened at Rs 405 and touched a high of Rs 418. However, it slipped 8.3% from there to touch a low of Rs 383. It is now trading with a loss of Rs 24 or 5.7%, at Rs 391. Around 133,000 shares have changed hands at the counter so far.

The iron ore mining major, NMDC?s follow-on public offer (FPO) will be one of its kind in the recent history of public issues considering that the price discovery for the offer could prove to be a difficult task for the lead managers and the government.

The market believes that the stock is expensive as it is trading at a price-to-earnings (P/E) multiple of about 52 times based on its annualised earnings (for nine months of current fiscal) of 2009-10, or about 19 times its net sales of 2008-09. Even on the basis of enterprise value (EV) to EBIDTA, it is available at 23 times, much higher than most of its peers which are trading at about 8 times.

The company has also planned an expansion and has submitted a $230-million non-binding bid to buy 70 per cent stake in an Australian mine owned by Perth-based Atlas Iron.