NMDC - Free float to increase to meaningful levels - Motilal Oswal

Expect 31% upside from floor price; reiterate Buy

- The promoters (government of India) of NMDC have issued a notice of offer for sale (OFS) of 397m shares or 10% of its equity. Allocation will be on price priority basis at multiple clearing prices as per the relevant SEBI OFS circular.

- Floor price has been fixed at INR147/share, valuing the issue at INR58.3b. Sales will be executed within the trading hours on 12 December.

- After investors take up the offer, NMDC's free float will increase to a meaningful 20%. NMDC will have the largest market capitalization in the Indian metals and mining sector. There is also a reasonable chance of it finding its way into the benchmark indices.

- Based on the floor price, the stock is available at an attractive 7x FY14E EPS and an EV of 3.6x FY14E EBITDA. Our target price is INR192 (EV of 5x FY14E EBITDA), implying 31% upside from the floor price. Reiterate Buy.

Source : Equity Bulls

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