MOIL Limited (MOIL), a Miniratna public sector unit, incorporated in 1896, is India's largest producer of manganese ore by volume. The company has access to 21.9 million tonnes of proved and probable reserves and a total of 69.5 million tonnes of inferred indicated mineral resources out of the total domestic manganese resources of 378.6 million tonnes. It derives 51.5% of its revenue from top 10 customers with Maharashtra Elektrosmelt Ltd and Bhilai Steel plant accounting for 22.1% revenue share.
MOIL operates 10 mines located in the Nagpur and Bhandara district of Maharashtra and in the Balaghat district of Madhya Pradesh. Out of which 7 mines are underground and 3 mines are open cast mines. The company is engaged in the production of manganese ore and other value added products like Electrolytic Manganese Dioxide (EMD) and Ferro Manganese.
Key Investment Highlights
Favorable demand- supply scenario
On the back of a 9.2% CAGR in the domestic steel consumption demand for Managanese is expected to more than double from 2.4 mt to ~ 5 mt by FY12. Approximately 90% of the Manganese ore is used in steel production and with India being a net importer of manganese, the company is well placed to benefit from the demand supply mismatch.
Largest producer of Manganese ore; high reserve baseMOIL is the largest producer of Manganese Ore in India (516,749 tonnes for H2FY11) and accounts for almost 50% of India's total production. It has access to significant resources and reserves and 55% of its proved and proven resources have average manganese content of 40% or higher, 27.5% of its proved and proven resources have average manganese content of 36-39.9%. This combines favorably with the Indian manganese reserves, 51% of which are of low or mixed grade.
Eyeing Overseas Acquisitions to expand resource baseWith the limited manganese
reserves in the country and on the back of growing steel demand, MOIL is all set to expand its resource base. MOIL along with NMDC, India's largest iron ore producer, is exploring opportunities in South Africa, Congo & Turkey to expand its resource base. Besides manganese, MOIL is also diversifying its product portfolio and eyeing nickel & chromite properties abroad.
Low cost of mining and huge cash reserves make for compelling financials
MOIL is a low cost producer of managanese with the average cost of mining of Rs 2058 per tonne. Its debt free capital structure with cash reserves of Rs 17,629 million provides it sufficient resources to fund its expansion and acquisition plans, support the working capital requirements.
The Empowered Group of Minisiters (EGoM) has fixed MOIL (former Manganese Ore India) IPO price band at Rs 340-375.
The IPO (initial public offering) will open for subscription from November 26. The company will raise Rs 1238 crore from the primary markets.
The government will offload 20% stake in MOIL, in which Central Government will offload 10% stake and Madhya Pradesh Government will to offload 5% and Maharashtra Government to will offload 5% stake. Retail investors, employees will get 5% discount.
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OM SHRI GANESHAYA NAMAH
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