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Mishra Dhatu Nigam’s IPO: Things you Should Know Before Investing 

P/E works out to 30.9x, which experts say is high considering Midhani’s historical two year CAGR top-line and bottom-line growth.

Updated: March 22, 2018 4:44 PM IST

By Teena Jain Kaushal

Mishra Dhatu Nigam’s IPO: Things you Should Know Before Investing 

Initial Public Offering (IPO) of Mishra Dhatu Nigam (Midhani) is open for subscription from March 21, 2018. The IPO is part of the disinvestment program of the government through which it plans to offload 26% of its stake.

Midhani is one of the leading manufacturers of special steels, super alloys and the only manufacturer of titanium alloys in India. These are considered high value products and cater to very niche segments such as defence, space and power. The company, which was incorporated in 1973, and achieved the status of a Mini Ratna, Category-I company in 2009.

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Here is all you need to know before investing in the IPO of Midhani:

  1. The price band of the IPO is Rs87 to Rs90.  There is a discount of Rs3 per equity share to retail investors and its employees.
  2. The company plans to raise Rs438 crore through offer for sale resulting in dilution of 26% of its post offer paid-up equity share capital.
  3. The company has an order book of Rs517crore which works out to 0.64x compared to FY2017 revenue, indicating low revenue potential.
  4. According to a report by Angel Broking, the company reported low top-line and bottom-line CAGR of 11% and 10% respectively over FY15-17.
  5. For financial year 2017 the company reported the net sales of Rs 810 crore and net profit of Rs 126 crore at the operating profit margin of 22.9%. In the first half of 2018 the company the company has reported low net sales and profitability of Rs208 crore and Rs 27 crore, respectively.
  6. In terms of valuations, the report states, the pre-issue Price Earnings ratio (P/E) works out to 30.9x HFY2018 annualized earnings (at the upper end of the issue price band), which is high considering Midhani’s historical two year CAGR top-line & bottom-line growth.
  7. Post-issue market cap of the company is estimated to be Rs1630crore to Rs1686crore.
  8. On the positive side the company has long long-term customer relationships and in-house R&D team aimed at latest development and improvement of product quality and processes innovation
  9. The entire proceeds will go to the government. The issue will be undertaken on the behalf of the President of India acting through the ministry of defence. The government will offer 48,708,400 equity shares of face value of RS10 each.

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