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Business News/ Market / Stock-market-news/  Midhani IPO opens today: Brokerages divided on prospects

Mumbai: Brokerages were divided about the prospects of the Rs438-crore initial public offer (IPO) of speciality alloy maker Mishra Dhatu Nigam Ltd (Midhani), which launches on Wednesday. While some felt the valuation was expensive, a few were upbeat on the IPO given the strong outlook for the company.

The IPO is part of the disinvestment programme through which the government will offload 26% of its holding, and the price band is fixed at Rs87-90. The entire proceeds from the share sale will go to the government. Midhani’s IPO is the third this calendar year by a state-run company. The issue closes on Friday.

Hyderabad-based Midhani manufactures special steel, super alloys and titanium alloys. It was incorporated in 1973 by the ministry of defence.

In terms of valuations, the pre-issue price-to-earnings ratio (PE) works out to 30.9 times annualized earnings for the first half of fiscal year 2018, at the upper end of the price band, which is high considering Midhani’s historical two-year CAGR (compounded annual growth rate ) of topline and bottomline, Angel Broking said in a note on 19 March, while recommending a “neutral" rating on the issue.

“Further, Midhani has an undersized order book which lacks revenue visibility, coupled with lower return ratios. Considering the above factors, we recommend neutral rating on the issue," Angel Broking added.

A few agreed.

“Although company has most advanced and unique facilities & capability to manufacture wide range of advanced product but weak order book size of Rs517 crore against strong topline in FY16 & FY17 doesn’t infuse optimism in company," Hem Seucrities said, while recommending “avoid" on the issue.

For some, the strong outlook was a key positive trigger.

“Given the strong outlook on Defence and Space sector, increasing product basket and high barriers to entry, OFS (offer for sale) of Midhani provides good long-term opportunity with attractive valuations," Prabhudas Lilladher Pvt. Ltd. said in a note on 20 March.

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Updated: 21 Mar 2018, 08:34 PM IST
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